Two Essays On Empirical Asset Pricing
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Two Essays On Empirical Asset Pricing
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Author : Liang Zhang
language : en
Publisher:
Release Date : 2008
Two Essays On Empirical Asset Pricing written by Liang Zhang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Stocks categories.
Two Essays On Empirical Asset Pricing
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Author : Xiaohong Zheng
language : en
Publisher:
Release Date : 2007
Two Essays On Empirical Asset Pricing written by Xiaohong Zheng and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Capital assets pricing model categories.
Two Essays In Empirical Asset Pricing
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Author : Thomas Ruf
language : en
Publisher:
Release Date : 2012
Two Essays In Empirical Asset Pricing written by Thomas Ruf and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
Two Essays In Empirical Asset Pricing
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Author : Flavio Nardi
language : en
Publisher:
Release Date : 2017
Two Essays In Empirical Asset Pricing written by Flavio Nardi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
This thesis includes two research papers in the area of empirical asset pricing. In the first research paper titled "Option implied moments and risk aversion", under reasonable assumptions, I provide empirical evidence that index options implied higher moments can predict the index returns and Sharpe ratio. Specifically, I present a method to recover option implied subjective moments of the S &P500 index under the assumption of no arbitrage and logarithmic utility. This result adds further evidence to the extensive finance literature that claims that market returns are predictable. In the second research paper titled "Expected returns: systematic risk or firm characteristics" I provide empirical evidence that expected returns can be viewed as determined by the exposure of firm returns to systematic factors that are based on firm characteristics, and not directly to the cross--sectional differences in the firm characteristics. This result addresses an ongoing debate within the empirical asset pricing literature as to whether the cross--section of expected returns is "explained" by the loadings to systematic factors or by differences in firm characteristics. The evidence I provide supports the loading to systematic factors story, consistent with the consumption asset pricing model.
Two Essays On Empirical Asset Pricing
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Author : Yangqiulu Luo
language : en
Publisher:
Release Date : 2013
Two Essays On Empirical Asset Pricing written by Yangqiulu Luo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with Finance categories.
This dissertation consists of two essays on empirical asset pricing. The first essay examines if the idiosyncratic risk is priced. Theories such as Merton (1987) predict that idiosyncratic risk should be priced when investors do not diversify their portfolio. However, the previous literature has presented a mixed set of results of the pricing of idiosyncratic risk. We find strong evidence that idiosyncratic risk is priced differently across bull and bear markets. For the sample period from June 1946 to the end of 2010, a factor portfolio long on stocks with high idiosyncratic volatility and short on stocks with low idiosyncratic volatility yields an equal-weighted monthly return of 1.59% for bull markets but -1.29% for bear markets. These evidences support the hypothesis that investors are rewarded for betting on individual stocks during bull markets and holding more diversified portfolios during bear markets. The second essay examines the role of the limits to arbitrage in the negative effect of liquidity on subsequent stock returns. I hypothesize that if the negative effect persists because of the limits to arbitrage, the effect should be more pronounced when there are more severe limits to arbitrage. My empirical evidence supports the hypothesis. In addition, I find that the effect of the limits to arbitrage on the liquidity anomaly is not correlated to the liquidity risk.
Essays In Empirical Asset Pricing
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Author : Weike Xu
language : en
Publisher:
Release Date : 2016
Essays In Empirical Asset Pricing written by Weike Xu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with Institutional investors categories.
This dissertation includes two essays. The first essay examines how changes in ownership breadth affect the profitability of 21 anomaly-based strategies. I find that the profitability of these strategies is weaker following a growth in ownership breadth in the prior quarter. The return pattern is primarily attributed to the insignificant returns in the short portfolios. In addition, reduction in short-sale constraints due to increase in the ownership breadth can explain the insignificant return in the short portfolio. The conclusions stay the same after controlling for the common risk factors including the Fama-French three factors and the momentum factor. My results are robust to different size groups, different portfolio weighting methods, an alternative measure of active institutional investors and cross-sectional regression tests. These findings indicate that active institutional investors improve market efficiency. In the second essay, I examine how the relaxation of short-sale constraints affects the readability in financial disclosures using a natural experiment. From 2005 to 2007, the SEC implemented a pilot program in which one-third of the Russell 3000 stocks were randomly selected as pilot stocks and were exempted from short-sale price tests. I find that the readability of 10-K reports for the pilot stocks significantly decreases during the program period. Moreover, the relation between a reduction in short-sales constraint and annual report readability is not uniform in the cross-section. I find that the results are more pronounced for firms that are smaller, less profitable or riskier; for firms that have lower institutional ownership or analyst coverage; and for firms with worse corporate governance or corporate social responsibility. I conclude that Regulation SHO leads to lower readability in the context of financial disclosures.
Two Essays On Empirical Asset Pricing
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Author : Shengzhe Tang
language : en
Publisher:
Release Date : 2018
Two Essays On Empirical Asset Pricing written by Shengzhe Tang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
The main theme of my doctoral research is empirical asset pricing. The first chapter of this thesis focuses on the time series predictability of stock returns. I provide improved methods for estimating a predictive regression model system where the future aggregate stock return is regressed on the current value of a single predictor, and the innovations are correlated normal random variables. I propose improved estimators of the predictive slope which practically eliminate finite-sample biases and achieve small mean squared errors. I develop fast computing methods for evaluating the probability distribution of the OLS predictive slope, which enables an exact performance measurement of these estimators. This also facilitates a comparison of several prominent tests of return predictability with respect to their actual test sizes. The usefulness of these econometric methods is illustrated using U.S. equity data. The second chapter is a joint work with Ruslan Goyenko and Chayawat Ornthanalai. We study the determinants of option illiquidity measured by relative bid-ask spreads of intraday option transactions on S 500 firms over an extended period. We find that market makers' hedging costs significantly impact option illiquidity with the future rebalancing cost dominating the initial delta-hedging cost. Inventory risk and adverse selection also contribute to the cross-sectional variation in option illiquidity, with the latter effect intensifying around information events. We find that option-induced order flows predict their underlying stock returns only when option illiquidity simultaneously increases. This suggests that shocks to option illiquidity help to distinguish abnormal order flows that contain private information from those induced by liquidity trading. We show that a simple stock portfolio strategy contingent on option illiquidity shocks yields a risk-adjusted return of 16.35% per year.
Essays On Empirical Asset Pricing
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Author : Chishen Wei
language : en
Publisher:
Release Date : 2011
Essays On Empirical Asset Pricing written by Chishen Wei 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.
This dissertation contains two essays that use empirical techniques to shed light on open questions in the asset pricing literature. In the first essay, I investigate whether foreign institutional investors affect stock liquidity in domestic equity markets. The evidence indicates that stocks with higher foreign institutional ownership subsequently experience higher liquidity. However, it is difficult to interpret the causal relation of this finding because institutional investors self-select into more liquid stocks. To solve this problem, I exploit a provision in the 2003 US dividend tax cut which extends tax-relief to dividends from US tax-treaty countries but not to dividends from non-treaty countries. This natural experiment suggests a causal link between foreign institutional investors and liquidity. Consistent with the predictions of theoretical models, I find that liquidity improves due to foreign institutional investors increasing information competition. In the second essay, I introduce a new measure of difference of opinion using mutual fund portfolio weights to test prominent competing theories of the effect of heterogeneous beliefs on asset prices. The over-valuation theory (Miller (1977)) proposes that in the presence of short-sale constraints stock prices reflects only the view of optimistic investors which implies lower subsequent returns. Alternatively, neo-classical asset pricing models (Williams (1977), Merton (1987)) suggest that differences of opinions indicate high levels of information uncertainty or risk which implies higher expected returns. My initial result finds no support for the over-valuation theory. Instead, the measure used in this study finds that high differences of opinion stocks weakly outperform low differences of opinion stocks by 2.42% annually which is more consistent with the information uncertainty explanation.
Two Essays On Empirical Asset Pricing
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Author : Jie Zhang
language : en
Publisher:
Release Date : 2006
Two Essays On Empirical Asset Pricing written by Jie Zhang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Arbitrage categories.
Essays On Empirical Asset Pricing
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Author : Steffen Windmüller
language : en
Publisher:
Release Date : 2021
Essays On Empirical Asset Pricing written by Steffen Windmüller 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.