The Real Effects Of Stock Market Mispricing At The Aggregate PDF Download
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Author | : Emmanuel Farhi |
Publisher | : |
Total Pages | : 0 |
Release | : 2005 |
Genre | : |
ISBN | : |
Download The Real Effects of Stock Market Mispricing at the Aggregate Book in PDF, ePub and Kindle
In this paper we investigate whether stock market overpricing leads to aggregate (real) inefficiencies. We first investigate a standard dynamic contracting model of investment subject to financing constraints. We show that stock market mispricing will have two robust effects on welfare: on the one hand it will distort investment decisions and lead to inefficiencies. On the other hand it will alleviate underinvestment problems and allow some efficient projects to be undertaken. We then turn to the data and investigate which of the two effects dominates at the aggregate. By using proxies for investor sentiment within a vector autoregression (VAR) we find that positive shocks to sentiment boost (real) investment while reducing aggregate profits over the long run, all else equal. We interpret this as evidence that mispricing causes more inefficiencies than it corrects.
Author | : Xin (Simba) Chang |
Publisher | : |
Total Pages | : 33 |
Release | : 2006 |
Genre | : |
ISBN | : |
Download The Real Impact of Stock Market Mispricing - Evidence from Australia Book in PDF, ePub and Kindle
Using a large panel of Australian firms, we investigate if mispricing in the stock market has an impact on firm-level investment. A significantly positive relation is documented between investment and the proxies for mispricing, suggesting that overpriced (underpriced) firms tend to overinvest (underinvest). Furthermore, we find that equity-dependent firms display a more pronounced sensitivity of investment to stock misvaluation than do nonequity-dependent firms. Taken together, our findings evidence that mispricing in Australian capital markets may have significant influence on the real economy, and the influence works though an equity-financing channel.
Author | : John Canning |
Publisher | : |
Total Pages | : 768 |
Release | : 1975 |
Genre | : Artists |
ISBN | : 9780285620407 |
Download 100 Great Lives Book in PDF, ePub and Kindle
Author | : Hersh Shefrin |
Publisher | : College Ie Overruns |
Total Pages | : 300 |
Release | : 2017-04-16 |
Genre | : Corporations |
ISBN | : 9781259254864 |
Download Behavioral Corporate Finance Book in PDF, ePub and Kindle
Author | : Malcolm Baker |
Publisher | : |
Total Pages | : 56 |
Release | : 2004 |
Genre | : Capital investments |
ISBN | : |
Download The Stock Market and Investment Book in PDF, ePub and Kindle
"Foreign direct investment offers a rich laboratory in which to study the broader economic effects of securities market mispricing. We outline and test two mispricing-based theories of FDI. The cheap assets' or fire-sale theory views FDI inflows as the purchase of undervalued host country assets, while the cheap capital' theory views FDI outflows as a natural use of the relatively lowcost capital available to overvalued firms in the source country. The empirical results support the cheap capital view: FDI flows are unrelated to host country stock market valuations, as measured by the aggregate market-to-book-value ratio, but are strongly positively related to source country valuations and negatively related to future source country stock returns. The latter effects are most pronounced in the presence of capital account restrictions, suggesting that such restrictions limit cross-country arbitrage and thereby increase the potential for mispricing-driven FDI"--NBER website
Author | : Irving Fisher |
Publisher | : Simon and Schuster |
Total Pages | : 152 |
Release | : 2014-03-27 |
Genre | : Business & Economics |
ISBN | : 1627939997 |
Download The Money Illusion Book in PDF, ePub and Kindle
In economics, money illusion refers to the tendency of people to think of currency in nominal, rather than real, terms. In other words, the numerical/face value (nominal value) of money is mistaken for its purchasing power (real value). This is false, as modern fiat currencies have no inherent value and their real value is derived from their ability to be exchanged for goods and used for payment of taxes. The term was coined by John Maynard Keynes in the early twentieth century. Almost every one is subject to the "Money Illusion" in respect to his own country's currency. This seems to him to be stationary while the money of other countries seems to change. It may seem strange but it is true that we see the rise or fall of foreign money better than we see that of our own.-IRVING FISHER
Author | : Andrew Ang |
Publisher | : Now Publishers Inc |
Total Pages | : 99 |
Release | : 2011 |
Genre | : Business & Economics |
ISBN | : 1601984685 |
Download The Efficient Market Theory and Evidence Book in PDF, ePub and Kindle
The Efficient Market Hypothesis (EMH) asserts that, at all times, the price of a security reflects all available information about its fundamental value. The implication of the EMH for investors is that, to the extent that speculative trading is costly, speculation must be a loser's game. Hence, under the EMH, a passive strategy is bound eventually to beat a strategy that uses active management, where active management is characterized as trading that seeks to exploit mispriced assets relative to a risk-adjusted benchmark. The EMH has been refined over the past several decades to reflect the realism of the marketplace, including costly information, transactions costs, financing, agency costs, and other real-world frictions. The most recent expressions of the EMH thus allow a role for arbitrageurs in the market who may profit from their comparative advantages. These advantages may include specialized knowledge, lower trading costs, low management fees or agency costs, and a financing structure that allows the arbitrageur to undertake trades with long verification periods. The actions of these arbitrageurs cause liquid securities markets to be generally fairly efficient with respect to information, despite some notable anomalies.
Author | : Andrei Shleifer |
Publisher | : OUP Oxford |
Total Pages | : 225 |
Release | : 2000-03-09 |
Genre | : Business & Economics |
ISBN | : 0191606898 |
Download Inefficient Markets Book in PDF, ePub and Kindle
The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models of such inefficient markets. Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocks included in market indices, the persistence of stock price bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.
Author | : Thorsten Beck |
Publisher | : World Bank Publications |
Total Pages | : 67 |
Release | : 1999 |
Genre | : Banca central |
ISBN | : |
Download A New Database on Financial Development and Structure Book in PDF, ePub and Kindle
This new database of indicators of financial development and structure across countries and over time unites a range of indicators that measure the size, activity, and efficiency of financial intermediaries and markets.
Author | : Malcolm P. Baker |
Publisher | : |
Total Pages | : 39 |
Release | : 2009 |
Genre | : |
ISBN | : |
Download The Stock Market and Investment Book in PDF, ePub and Kindle
Foreign direct investment offers a rich laboratory in which to study the broader economic effects of securities market mispricing. We outline and test two mispricing-based theories of FDI. The quot;cheap assetsquot; or fire-sale theory views FDI inflows as the purchase of undervalued host country assets, while the quot;cheap capitalquot; theory views FDI outflows as a natural use of the relatively lowcost capital available to overvalued firms in the source country. The empirical results support the cheap capital view: FDI flows are unrelated to host country stock market valuations, as measured by the aggregate market-to-book-value ratio, but are strongly positively related to source countryvaluations and negatively related to future source country stock returns. The latter effects are most pronounced in the presence of capital account restrictions, suggesting that such restrictions limit cross-country arbitrage and thereby increase the potential for mispricing-driven FDI.