Asymmetric Cross-sectional Dispersion in Stock Returns
| Author | : Gregory R. Duffee |
| Publisher | : |
| Total Pages | : 44 |
| Release | : 2001 |
| Genre | : Stocks |
| ISBN | : |
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Asymmetric Risk Loadings in the Cross Section of Stock Returns
| Author | : Li Gu |
| Publisher | : |
| Total Pages | : 43 |
| Release | : 2005 |
| Genre | : |
| ISBN | : |
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Time-varying factor loadings exhibit pronounced asymmetry in the cross section of stock returns. To capture this asymmetry, we develop regime-switching versions of the CAPM and the Fama French three-factor model, allowing both factor loadings and predictable risk premiums to switch across regimes. We estimate the models jointly on the decile book-to-market portfolios, together with the market portfolio to investigate the role of asymmetric risk in the book-to-market premium. We find that betas of value stocks increase significantly during bear market episodes. However, we still reject that the book-to-market premium is equal to zero for both the regime-switching conditional CAPM and the Fama-French model, even in the presence of regimes.
The Cross-Sectional Dispersion of Stock Returns, Alpha and the Information Ratio
| Author | : Larry R. Gorman |
| Publisher | : |
| Total Pages | : |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
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Both the cross-sectional dispersion of U.S. stock returns and the VIX provide forecasts of alpha dispersion across high- and low-performing portfolios of stocks that are statistically and economically significant. These findings suggest that absolute return investors can use cross-sectional dispersion and time-series volatility as signals to improve the tactical timing of their alpha-focused strategies. Because active risk increases by a greater amount than alpha, however, high return dispersion/high VIX periods are followed by slightly lower information ratio dispersion. Therefore, relative return investors who keep score in an information ratio framework are unlikely to find return dispersion useful as a signal regarding when to increase or decrease the activeness of their portfolio strategies.
Skewness and Dispersion of Opinion and the Cross Section of Stock Returns
| Author | : Jinghan Meng |
| Publisher | : |
| Total Pages | : 50 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
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We show that the degree of dispersion and asymmetry of analysts' earnings forecasts is related to future stock returns. When skewness is negative, future returns are decreasing in the degree of dispersion of analysts' earnings forecasts; when skewness is positive, future returns are increasing in the degree of dispersion of analysts earnings forecasts. We develop a model that incorporates dispersion and asymmetry in agents' beliefs that can account for these empirical facts.
Option-Implied Variance Asymmetry and the Cross-Section of Stock Returns
| Author | : Tao Huang |
| Publisher | : |
| Total Pages | : 48 |
| Release | : 2018 |
| Genre | : |
| ISBN | : |
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We find a positive relationship between individual stocks' implied variance asymmetry, defined as the difference between upside and downside risk-neutral semivariances extracted from out-of-money options, and future stock returns. The high-minus-low hedge portfolio earns the excess return of 0.90% (0.67%) per month in equal-weighted (value-weighted) returns. We show that implied variance asymmetry provides a neat measure of risk-neutral skewness and outperforms the standard risk-neutral skewness in predicting the cross-section of future stock returns. Risk-based equilibrium asset pricing models can not explain such a positive relationship, which instead can be potentially explained by information asymmetry and informed trading.
Asymetric Cross-sectional Dispersion in Stock Returns
| Author | : Gregory R. Duffee |
| Publisher | : |
| Total Pages | : 32 |
| Release | : 2001 |
| Genre | : Investments |
| ISBN | : |
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The Bulls and Bears in the Cross-Section of Stock Returns
| Author | : Cheekiat Low |
| Publisher | : |
| Total Pages | : 37 |
| Release | : 1998 |
| Genre | : |
| ISBN | : |
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Many financial decision-makers seem to regard risk as the variability of returns below some pre-specified target and treat above-target variability as a sweetener. The disutility from losses also appears to be larger than the utility from gains. Using some simple metrics of downside bearishness and upside bullishness constructed from semivariances, this paper tests for the empirical content of this asymmetry. Some of these simple metrics are priced in the U.S. stock market. In particular, exploring a composite metric of asymmetric risk reveals that non-linearity in the covariation of stock returns with bullish and bearish states of the market carries a significant price. Also, market premium for bearishness is larger in magnitude than that for bullishness, lending support to the existence of loss aversion in the aggregate. While small-cap stocks tend to be more bearish than bullish, the asymmetric risk effect is not spuriously driven by the size effect. Finally, some results consistent with an aymmetric-risk-based explanation for the puzzles of return momentum and reversal are presented.
Return Asymmetry and the Cross Section of Stock Returns
| Author | : Zhongxiang Xu |
| Publisher | : |
| Total Pages | : 41 |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
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This paper develops a new measure of return asymmetry, following Patil et al. (2012). We demonstrate that the return asymmetry measure helps explain the cross section of stock returns. Consistent with results in Barberis and Huang (2008), our empirical findings show that stocks with high return asymmetry exhibit low expected returns. The negative relation between return asymmetry and the cross section of stock returns persists for up to the 12-month forecast horizon and remains robust after controlling for the effects of skewness.
Sustainability of the Theories Developed by Mathematical Finance and Mathematical Economics with Applications
| Author | : Wing-Keung Wong |
| Publisher | : MDPI |
| Total Pages | : 382 |
| Release | : 2020-12-15 |
| Genre | : Business & Economics |
| ISBN | : 3039365312 |
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The topics studied in this Special Issue include a wide range of areas in finance, economics, tourism, management, marketing, and education. The topics in finance include stock market, volatility and excess returns, REIT, warrant and options, herding behavior and trading strategy, supply finance, and corporate finance. The topics in economics including economic growth, income poverty, and political economics.
Cross-Sectional Dispersion and Expected Returns
| Author | : Thanos Verousis |
| Publisher | : |
| Total Pages | : 33 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
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This study investigates whether the cross-sectional dispersion of stock returns, which reflects the aggregate level of idiosyncratic risk in the market, represents a priced state variable. We find that stocks with high sensitivities to dispersion offer low expected returns. Furthermore, a zero-cost spread portfolio that is long (short) in stocks with low (high) dispersion betas produces a statistically and economically significant return, after accounting for its exposure to other systematic risk factors. Dispersion is associated with a significantly negative risk premium in the cross-section (-1.32% per annum) which is distinct from premia commanded by a set of alternative systematic factors. These results are robust to a wide set of stock characteristics, market conditions, and industry groupings.
