Three Essays On Asset Pricing And Factor Investing
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Three Essays On Asset Pricing And Factor Investing
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Author : Philipp A. Dirkx
language : en
Publisher:
Release Date : 2021
Three Essays On Asset Pricing And Factor Investing written by Philipp A. Dirkx and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
Three Essays In Asset Pricing
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Author : Mehdi Karoui
language : en
Publisher:
Release Date : 2013
Three Essays In Asset Pricing written by Mehdi Karoui and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
"This thesis consists of three essays that explore alternative approaches to extracting information from option data, and, along somewhat different lines, examine the channels through which liquidity is priced in equity options.The first essay proposes a novel approach to extracting option-implied equity premia, and empirically examines the information content of these risk premia for forecasting the stock market return. Our approach does not require specifying the functional form of the pricing kernel, and does not impose any restrictions on investors' preferences. We only assume the existence of put and call options which complete the market, and show that the implied equity premium can be inferred from expected excess returns on a portfolio of options. An empirical investigation of S&P 500 index options yields the following conclusions: (i) the implied equity premium predicts stock market returns; (ii) the implied equity premium consistently outperforms variables commonly used in the forecasting literature both in- and out-of-sample; (iii) the implied equity premium is positively related to future returns and negatively related to current returns, as theoretically expected.The second essay studies the effect of illiquidity on equity option returns. Illiquidity is well-known to be a significant determinant of stock and bond returns. We are the first to report on illiquidity premia in equity option markets using a large cross-section of firms. An increase in option illiquidity decreases the current option price and predicts higher expected delta-hedged option returns. This effect is statistically and economically significant, and it is consistent with existing evidence that market makers in the equity options market hold net long positions. The illiquidity premium is robust across puts and calls, across maturities and moneyness, as well as across different empirical approaches. It is also robust when controlling for various firm-specific variables including a standard measure of illiquidity of the underlying stock. For long term options, we find evidence of a liquidity risk factor. In the third essay, we demonstrate that in multifactor asset pricing models, prices of risk for factors that are nonlinear functions of the market return can be readily obtained using data on index returns and index options. We apply this general result to the measurement of the conditional price of coskewness and cokurtosis risk. The price of coskewness risk corresponds to the spread between the physical and the risk-neutral second moments, and the price of cokurtosis risk corresponds to the spread between the physical and the risk-neutral third moments. Estimates of these prices of risk have the expected sign, and they lead to reasonable risk premia. An out-of-sample analysis of factor models with coskewness and cokurtosis risk indicates that the new estimates of the price of risk improve the models. performance. The models also robustly outperform competitors such as the CAPM and the Fama-French model." --
Three Essays On Asset Pricing
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Author : Shi Li
language : en
Publisher:
Release Date : 2020
Three Essays On Asset Pricing written by Shi Li and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
This dissertation consists of three essays on asset pricing. The first essay examines the return information conveyed by a firm's dividend deviation, defined as the difference between a firm's actual dividend per share (DPS) and its target DPS. We find that underpaying stocks (i.e., stocks in the lowest dividend deviation quintile) provide 5.4% more annualized risk-adjusted return compared to overpaying stocks (i.e., stocks in the highest dividend deviation quintile). A dividend deviation factor carries a risk premium of 5.64% per annum and is a proxy for systematic risk that is not captured by existing factor models. Potential explanations include financial constraints and overinvestments. Compared with overpaying firms, underpaying firms are more financially constrained and thus generate higher returns. After large investments, underpaying firms significantly underperform compared to their peers while overpaying firms remain statistically indifferent from their peers. In the second essay, we examine the relationship between firms' individual disagreement and the aggregate disagreement. We find a commonality in firms' individual disagreements exists at the market level, industry level, and geographic level. This commonality increases with firm's asymmetric information, uncertainty, and the degree of coverage, but decreases with firm's accounting information quality. We find a positive relation between the commonality in disagreement and stock returns. A higher disagreement commonality may indicate lower usefulness of firm-specific information that strengthens the synchronicity between firm's stock return and market return. In the third essay, we examine the effect of macro disagreement on stock returns in an international context. All G7 countries except Italy show a significant local disagreement beta effect, which is robust with respect to both size and value effects. Moreover, the macro disagreement on the U.S. economy shows a strong spillover effect on all non-U.S. G7 countries. The degree of a country's spillover effect is largely and positively in line with the magnitude of its trading activities with the U.S. Our paper demonstrates the pervasiveness of a disagreement beta effect, suggesting that investors bet against each other on macro disagreement not only in the U.S., but also in other major G7 countries.
Three Essays On Asset Pricing In Regime And Esg Environments
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Author : Zongming Ma
language : en
Publisher:
Release Date : 2019
Three Essays On Asset Pricing In Regime And Esg Environments written by Zongming Ma and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
Asset pricing has been a focal point among a broad range of financial studies. Traditional asset pricing models are encountering challenges by empirical data and sustainable compliance. For example, the Black-Scholes-Merton (BSM) model exhibits the "volatility smile" puzzle and the role that sustainability plays in accounting for asset pricing remains controversial. Based on these observations, I raise three research questions. First, can an option valuation model with a pricing kernel that depends on market regimes address volatility smile and be consistent with observed market prices? Second, how do the Environment, Social and Governance (ESG) ratings affect asset prices across different economic sectors, firm sizes, and time horizons? Third, since the macroeconomic environment affects firms' strategies and financial performance, how do ESG ratings affect stock returns across market regimes? I address these questions in three essays. The first essay reveals that the proposed model can predict the market option prices more accurate than the alternative models (Black-Scholes-Merton, Heston-Nandi, Hardy) do for both the in-sample and out-of-sample data across regimes. The second essay finds that ESG ratings have a positive effect on stock returns, particularly for sensitive industries (gas, oil, chemical, mining, alcohol, and tobacco, etc.), for large capitalization firms, and for long-term investment horizons. The third essay uses a machine learning method to identify market regime using 134 macroeconomic factors and a factor model to discover a positive relationship between ESG and asset returns in the bear regime. The factor model also show that the impact of ESG rating on stock returns in a sector, given a market regime, depends significantly on the level of demand in that sector under that market regime.
Three Essays On Empirical Asset Pricing
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Author : Wenqing Wang
language : en
Publisher:
Release Date : 2004
Three Essays On Empirical Asset Pricing written by Wenqing Wang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Investments categories.
Three Essays On Asset Pricing And Behavioral Finance
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Author : Huijing Li
language : en
Publisher:
Release Date : 2021
Three Essays On Asset Pricing And Behavioral Finance written by Huijing Li and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
This dissertation consists of three essays. In the first essay, we develop a model to study the role of CSR costs in the cross-section of stock returns. Our CAPM-based model predicts CSR factors are priced in the cross-section of stock returns. We then empirically test the implication of our pricing model by using data from MSCI ESG. The univariate analysis reveals that the quantile portfolio with the lowest CSR (social or environmental) cost beta significantly outperforms the highest CSR cost beta portfolio. In addition, we find negative and significant risk premiums on both the environmental and social risk factor. The second essay reports the results of three experimental studies that investigate the impact of moral identity (MI) on individuals' financial decision-making. Study 1 suggests that individuals' MI is negatively related to the willingness to invest (WTI) in an immoral portfolio. Study 2 shows that individuals with a low MI have a higher WTI for an immoral portfolio only when they are incentivized by a higher financial return. Study 3 reveals that when immoral stocks provide a higher return incentive, individuals with low MI do have a higher WTI, but only when they perceive themselves to be distant from the immoral company. When individuals perceive themselves to be physically close to an immoral company, they are less sensitive to the return incentive and their WTI is lower. In the third essay, we study human capital from the perspective of ex ante health perception. We obtain search volume data of medical symptoms from Google Trends and follow the methodology of Da, Engelberg, and Gao, (2015). We propose that increased (decreased) search volume of medical symptoms implies an ex ante decline (increase) in the value of health oriented human capital. We then use the inverse of our health concern index to proxy the health dimension of human capital (denoted as HHC). We estimate stock exposure (beta) to the HHC, and a univariate analysis reveals the highest HHC beta portfolio significantly outperforms the lowest HHC beta portfolio. Also, our results suggest that the HHC is positively priced in the cross-section of stock returns.
Three Essays On Empirical Asset Pricing In International Equity Markets
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Author : Birgit Charlotte Müller
language : de
Publisher: Springer Gabler
Release Date : 2021-08-20
Three Essays On Empirical Asset Pricing In International Equity Markets written by Birgit Charlotte Müller and has been published by Springer Gabler this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-08-20 with Business & Economics categories.
In this Open-Access-book three essays on empirical asset pricing in international equity markets are presented. Despite being of fundamental economic and scientific importance, international financial markets have remained considerably underresearched until today. In the first essay, the role of firm-specific characteristics is analyzed for the momentum effect to exist in international equity markets. The second essay investigates the validity, persistence, and robustness of the newly discovered capital share growth factor across international equity markets as proposed by Lettau et al. (2019) for the U.S. market. Lastly, the third and final essay studies stock market reactions of European vendor banks to distressed loan sale announcements.
Three Essays On Empirical Asset Pricing
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Author : Amir Akbari
language : en
Publisher:
Release Date : 2016
Three Essays On Empirical Asset Pricing written by Amir Akbari and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
"This thesis explores the role of borrowing frictions, exchange rate risk, and intertemporal demand in stock prices across international financial markets. Specifically, I study how global asset prices are governed, considering the constraints and incentives that investors face when making investment decisions. The first essay adds a new dimension to the research on the dynamics of global market integration, providing an explanation for reversals in market integration via funding illiquidity. I show that when funding capital dries out, investors, unable to borrow and trade freely, fail to facilitate the integration process. Therefore, international asset prices during these periods are explained more by country-specific asset pricing factors than by global asset pricing factors. The second essay explores the role of exchange rate risk and intertemporal demand in international markets. These sources of risk are linked via the interest rate channel and are both likely proxies of the state variables that affect asset prices over time. We carefully disentangle the two risk factors and study the international equity market indices with multiple risk factors in a large cross-section through time. We show that the evidence of global pricing of risk crucially hinges on pooling assets with substantial cross-sectional variation. The third essay introduces a methodological innovation to study the dynamics of the compensation for the intertemporal risk in business cycles. Specifically, we contribute to the empirical asset pricing literature by studying the relative importance of prices of intertemporal risk during recessions, recoveries, and expansions." --
Three Essays On Asset Pricing Portfolio Choice And Behavioral Finance
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Author : Ehud Peleg
language : en
Publisher: ProQuest
Release Date : 2008
Three Essays On Asset Pricing Portfolio Choice And Behavioral Finance written by Ehud Peleg and has been published by ProQuest this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Capital assets pricing model categories.
Selected Essays In Empirical Asset Pricing
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Author : Christian Funke
language : en
Publisher: Springer Science & Business Media
Release Date : 2008-09-15
Selected Essays In Empirical Asset Pricing written by Christian Funke and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-09-15 with Business & Economics categories.
Christian Funke aims at developing a better understanding of a central asset pricing issue: the stock price discovery process in capital markets. Using U.S. capital market data, he investigates the importance of mergers and acquisitions (M&A) for stock prices and examines economic links between customer and supplier firms. The empirical investigations document return predictability and show that capital markets are not perfectly efficient.