Two Essays In Production Based Asset Pricing
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Two Essays In Production Based Asset Pricing
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Author : Robert B. Porter
language : en
Publisher:
Release Date : 2001
Two Essays In Production Based Asset Pricing written by Robert B. Porter and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with Assets (Accounting) categories.
Essays On Production Based Asset Pricing
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Author : Yifan Zhu
language : en
Publisher:
Release Date : 2022
Essays On Production Based Asset Pricing written by Yifan Zhu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with Operating leverage categories.
This dissertation consists of two essays on production-based asset pricing. The first essay studies the asset pricing implications of investment and disinvestment op- tions with a production-based model featuring costly reversibility. Investment options are contingent claims on assets in place so that they are riskier and earn higher expected re- turns. Disinvestment options with costly reversibility reduce exposure to aggregate risks amid deteriorating business conditions and lower expected returns on a firm. The inextri- cable link between investment options and disinvestment options explains the coexistence of the profitability premium and the value premium while retains a positive relation between profitability and market valuation ratios. My model also generates a procyclical profitability premium and a countercyclical value premium. In the second essay, my co-authors and I investigate the joint asset pricing effects of variable costs and fixed costs in a firm’s production process. While the latter such as SG&A expenses create an operating leverage effect, the variable costs allow firms to hedge against aggregate profitability shocks. Taking into account both types of production costs explains the empir- ical patterns in the cross-section asset returns in portfolios sorted by the gross profitability and operating leverage. Our model reconciles the seemingly contradictory phenomena that higher productivity firms earn lower returns ( ̇Imrohoro ̆glu and T ̈uzel (2014)), whereas more profitable, often more productive, firms earn higher returns (Novy-Marx (2013)). It also of- fers a novel explanation for the negative idiosyncratic volatility premium (Ang et al. (2006)) based on production costs.
Two Essays On Asset Pricing
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Author : Dan Luo
language : en
Publisher: Open Dissertation Press
Release Date : 2017-01-26
Two Essays On Asset Pricing written by Dan Luo and has been published by Open Dissertation Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-01-26 with categories.
This dissertation, "Two Essays on Asset Pricing" by Dan, Luo, 罗丹, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: This thesis centers around the pricing and risk-return tradeoff of credit and equity derivatives. The first essay studies the pricing in the CDS Index (CDX) tranche market, and whether these instruments have been reasonably priced and integrated within the financial market generally, both before and during the financial crisis. We first design a procedure to value CDO tranches using an intensity-based model which falls into the affine model class. The CDX tranche spreads are efficiently explained by a three-factor version of this model, before and during the crisis period. We then construct tradable CDX tranche portfolios, representing the three default intensity factors. These portfolios capture the same exposure as the S&P 500 index optionmarket, to a market crash. We regress these CDX factors against the underlying index, the volatility factor, and the smirk factor, extracted from the index option returns, and against the Fama-French market, size and book-to-market factors. We finally argue that the CDX spreads are integrated in the financial market, and their issuers have not made excess returns. The second essay explores the specifications of jumps for modeling stock price dynamics and cross-sectional option prices. We exploit a long sample of about 16 years of S&P500 returns and option prices for model estimation. We explicitly impose the time-series consistency when jointly fitting the return and option series. We specify a separate jump intensity process which affords a distinct source of uncertainty and persistence level from the volatility process. Our overall conclusion is that simultaneous jumps in return and volatility are helpful in fitting the return, volatility and jump intensity time series, while time-varying jump intensities improve the cross-section fit of the option prices. In the formulation with time-varying jump intensity, both the mean jump size and standard deviation of jump size premia are strengthened. Our MCMC approach to estimate the models is appropriate, because it has been found to be powerful by other authors, and it is suitable for dealing with jumps. To the best of our knowledge, our study provides the the most comprehensive application of the MCMC technique to option pricing in affine jump-diffusion models. DOI: 10.5353/th_b4819935 Subjects: Capital assets pricing model
Two Essays On Asset Pricing
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Author : Jun Xu
language : en
Publisher:
Release Date : 2011
Two Essays On Asset Pricing written by Jun Xu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
Essay One: A New Estimate of BetaThis essay examines a new method of estimating systematic risk, or "beta". Due to market imperfection, stock prices, especially those of small firms, do not move with the market index synchronously. Because of nonsynchronous or delayed reaction in price for small firms, the traditional beta estimated from the market model may not be a true reflection of systematic risk. In other words, since stock prices do not fully respond to the market in a single period, the contemporary beta may only reflect the partial systematic risk. As a result, the beta estimated from the market model is underestimated for small firms and overestimated for large firms. The same problem also causes betas estimated from the market model to vary greatly across different estimation horizons. I develop a model of delay/lead price reactions for small/large firms. Based on this model I derive a multiple-period regression equation for the new estimation of beta.^We then estimate the equation for each of the ten size-ranked decile portfolios at different estimation horizons, using monthly, weekly and daily returns. Betas estimated from the optimal estimation horizons for monthly, weekly, and daily returns are discussed. Our results show that, betas estimated at similar horizons, using monthly, weekly, and daily returns, are consistent with each other. Betas estimated for the ten size-decile portfolios from monthly, weekly, and daily average returns are positively related to those returns, respectively. Essay Two: Test of Capital Asset Pricing Model Based on a New Estimate of BetaThis essay tests the Capital Asset Pricing Model (CAPM), based on a new estimate of beta. The test methodology follows the classic Fama-MacBeth (1973) approach, using updated data from 1926-2010.^I ran each test on eleven different periods based on three different estimates of beta: the Ordinary Least Square (OLS) beta, the Scholes-Williams (1977) beta, and a new estimate of beta. From three long testing periods, 1935-1968, 1969-2010, and 1935-2010, all three hypotheses are confirmed based on the new estimate of beta. In other words there is a positive trade-off between average return and risk, and non-linearity and non-beta risk do not play a significant role in explaining the cross section of expected return. Test results from the three long periods based on the OLS beta and the Scholes-Williams beta are mixed and less supportive to CAPM. Our test results from the eight shorter periods do not confirm the CAPM. However, this may be due to the lack of power and efficiency of the test methodology when applied to short periods.^Overall, our results from long periods show that tests based on the new estimate of beta perform better than those based on the OLS beta and the Scholes-Williams beta in terms of supporting CAPM.
Two Essays On Asset Pricing
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Author : Dan Luo (Ph. D.)
language : en
Publisher:
Release Date : 2012
Two Essays On Asset Pricing written by Dan Luo (Ph. D.) and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with Capital assets pricing model categories.
Two Essays On International Asset Pricing
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Author : Pheng Lui Chng
language : en
Publisher:
Release Date : 1998
Two Essays On International Asset Pricing written by Pheng Lui Chng and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with Capital assets pricing model categories.
Essays On Asset Pricing In Production Economies
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Author : Andrew Yeh-Chi Chen
language : en
Publisher:
Release Date : 2014
Essays On Asset Pricing In Production Economies written by Andrew Yeh-Chi Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Chapter 3 examines general restrictions on production technologies implied by asset prices. It shows that representative firm models which are consistent with asset price data require either large capital adjustment costs, or volatile investment-specific technology shocks. These restrictions hold regardless of preferences, beliefs, operating leverage, or the completeness of asset markets. The restrictions summarize the sense in which asset prices are anomalous with respect to the theory of optimal investment.
Two Essays On Asset Pricing And Options Market
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Author : Huimin Zhao
language : en
Publisher: Open Dissertation Press
Release Date : 2017-01-27
Two Essays On Asset Pricing And Options Market written by Huimin Zhao and has been published by Open Dissertation Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-01-27 with categories.
This dissertation, "Two Essays on Asset Pricing and Options Market" by Huimin, Zhao, 趙慧敏, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. DOI: 10.5353/th_b4150839 Subjects: Options (Finance) Capital assets pricing model
Two Essays On Asset Pricing And Asset Choice
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Author : James Eric Gunderson
language : en
Publisher:
Release Date : 2004
Two Essays On Asset Pricing And Asset Choice written by James Eric Gunderson and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.
Essays On Asset Pricing
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Author : Gabriel Ignacio Cuevas Rodriguez
language : en
Publisher:
Release Date : 2023
Essays On Asset Pricing written by Gabriel Ignacio Cuevas Rodriguez and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with categories.
In Chapter 1, I analyze firms' misallocation through the output distortions channel, using a production-based asset pricing model as a framework. In the model, alpha measures the firm's ability to choose technologies to adapt to exogenous shocks. I find in the cross-section of the test portfolios the estimated curvature parameter alpha is more than two times the original value obtained in Belo (2010). This implies misallocations reduce the firm's ability to respond to the different states of nature. I calibrate and solve the model in the special case of a single representative firm. I find that the impact of misallocation on firm value, production, capital, investment, and investment return is larger when firms' ability to adapt to exogenous shocks is reduced. This indicates that firms may be less agile to adapt across states of nature and provides more evidence of the detrimental effect of misallocations. In Chapter 2 (with Denis Mokanov and Danyu Zhang), we document several facts about equity analysts' earnings expectations: (1) consensus earnings expectations underreact to news unconditionally, (2) the degree of underreaction declines during high-volatility periods, and (3) the degree of underreaction declines over our sample. To account for these findings, we develop a simple model featuring time-varying inattention. We show that our model is able to account for the unconditional profitability of momentum, momentum crashes, and the diminishing profitability of momentum over our sample. We propose a trading strategy that mixes short-run and long-run momentum signals and show that the mixed momentum strategy outperforms the conventional momentum strategies. Finally, we use a machine learning algorithm to estimate the predictable component of earnings surprises and construct a portfolio that is long (short) on stocks with excessively pessimistic (optimistic) earnings expectations. The resultant trading strategy generates an annualized Sharpe ratio of about 1.16 and its returns are not explained by popular factor models.