Essays On The Cross Section Of Returns PDF Download
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Author | : Woo Hwa Koh |
Publisher | : |
Total Pages | : 103 |
Release | : 2015 |
Genre | : |
ISBN | : |
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This dissertation examines what factors determine the cross-section of returns. It contains three chapters. Chapter 1 investigates whether uncertainty shocks can explain the value premium puzzle. Intuitively, the value of growth options increases when uncertainty is high. As a result, growth stocks hedge against uncertainty risk and earn lower risk premiums than value stocks. An investment-based asset pricing model augmented with time-varying uncertainty accounts for both the value premium and the empirical failure of the capital asset pricing model (CAPM). This study also shows that uncertainty shocks influence cross-sectional investment. Uncertainty has a negative impact on the investment of value firms, while it has a positive impact on the investment of growth firms.
Author | : James L. Davis |
Publisher | : |
Total Pages | : 254 |
Release | : 1994 |
Genre | : |
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Download Two Essays on the Cross-section of Stock Returns Book in PDF, ePub and Kindle
Author | : Zhuo Tan |
Publisher | : |
Total Pages | : |
Release | : 2013 |
Genre | : Finance |
ISBN | : |
Download Two Essays on the Cross-section of Stock Returns Book in PDF, ePub and Kindle
This dissertation consists of two essays that address issues related to the cross-section of stock returns. The first essay documents that actively managed mutual funds invest disproportionately in stocks with high historical risk-adjusted returns (alpha). This alpha-chasing behavior has a destabilizing effect on stock price. Specifically, low-alpha stocks earn higher subsequent returns than high-alpha stocks up to two months following portfolio formation—i.e. alpha is not persistent, but reverses. Consistent with liquidity-based price pressure, I find that low- (high)-alpha stocks that are heavily traded by mutual funds exhibit strong subsequent return reversals. Further analysis finds that trades from a few large funds are the primary source of this trading. However, there is no evidence to support the view that herding by fund managers explains fund managers’ preference for high-alpha stocks. The reason why managers of large mutual funds chase high-alpha stocks when alpha is not persistent remains a puzzle. The second essay shows that a better measure of mispricing confirms the primary prediction of the limits-of-arbitrage hypothesis that high levels of idiosyncratic risk prevent arbitrage activity. Rather than using returns to size, B/M and momentum portfolios, I construct a mispricing measure based on the difference between a stock’s price and its intrinsic value estimated using the residual income model of Ohlson (1995). I confirm that this measure explains future returns. I then use it and idiosyncratic return volatility to proxy for mispricing and arbitrage risk, respectively. I find that expected returns to undervalued (overvalued) stocks monotonically increase (decrease) with idiosyncratic risk. These findings support the limits-of-arbitrage hypothesis and that idiosyncratic risk is an impediment to arbitrage.
Author | : Yong Wang |
Publisher | : |
Total Pages | : 139 |
Release | : 2005 |
Genre | : |
ISBN | : |
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Many factor models, with a variety of conditioning variables, have been proposed to explain cross-sectional returns. In chapter 2, we run a horse race among several proposed models. The purpose is to better understand which factors, in combination with which conditioning variables, explain the cross section of returns better, and to seek an economic interpretation of the specifications that appear most promising. We find that a consumption growth factor, conditioning on lagged business income growth, is the most successful in explaining cross sectional variation of average quarterly returns in the 25 Fama-French portfolios.
Author | : Peter Wong |
Publisher | : |
Total Pages | : 99 |
Release | : 2013 |
Genre | : |
ISBN | : |
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This dissertation studies two distinct topics. First, I examine whether the idiosyncratic volatility discount anomaly documented by Ang, Hodrick, Xing, and Zhang (2006, 2009) is related to earnings shocks, and I find that a substantial portion of the idiosyncratic volatility discount can be explained by earnings momentum and post-formation earnings shocks. When these two effects are accounted for, idiosyncratic volatility has little, if any, return predictability. Second, I propose a parsimonious measure to characterize the severity of the microstructure noise at the individual stock level and assess the impact of this microstructure induced illiquidity on cross-sectional return predictability. One of the main advantages of this measure is that it is very simple to construct (requires only daily stock returns data). Using this measure I find that firms with the largest microstructure bias command a return premium as large as 9.61% per year, even after controlling for the premiums associated with size, book-to-market, momentum, and traditional liquidity price impact and cost measures. In addition, the bias premium is strongest among small, low price, volatile, and illiquid stocks. On the other hand, the premiums associated with size, illiquidity, and return reversal are most pronounced among stocks with the largest bias.
Author | : Vinod Chandrashekaran |
Publisher | : |
Total Pages | : 256 |
Release | : 1994 |
Genre | : |
ISBN | : |
Download Essays on the Cross-sectional and Time-series Behavior of Stock Returns Book in PDF, ePub and Kindle
Author | : Mihai B. Ion |
Publisher | : |
Total Pages | : 0 |
Release | : 2013 |
Genre | : |
ISBN | : |
Download Essays on the cross-sectional predictability of stock returns Book in PDF, ePub and Kindle
Author | : Eugenio Carnemolla |
Publisher | : |
Total Pages | : 119 |
Release | : 2019 |
Genre | : |
ISBN | : |
Download Essays on Predictability in the Cross-section of Stock and Option Returns Book in PDF, ePub and Kindle
Thèse. HEC. 2019
Author | : Christopher Gadarowski |
Publisher | : |
Total Pages | : 604 |
Release | : 2000 |
Genre | : Capital market |
ISBN | : |
Download An Essay on Information and the Cross-section of Expected Returns Book in PDF, ePub and Kindle
Author | : 林琦 |
Publisher | : |
Total Pages | : 158 |
Release | : 2017 |
Genre | : Investment analysis |
ISBN | : |
Download Essays on the Analysis of Cross-sectional Stock Returns Book in PDF, ePub and Kindle