Is Economic Uncertainty Priced in the Cross-Section of Stock Returns?
|
|
- Sheila Stephany Montgomery
- 5 years ago
- Views:
Transcription
1 Is Economic Uncertainty Priced in the Cross-Section of Stock Returns? Turan Bali, Georgetown University Stephen Brown, NYU Stern, University Yi Tang, Fordham University 2018 CARE Conference, Washington DC May 18-19, 2018
2 Introduction Knight (1921) distinction between risk and true uncertainty Uncertainty when probability distribution is itself unknown Uncertainty, by its nature, cannot be measured and is uninsurable But is the result of measurable economic changes. Not much attention in the empirical asset pricing literature
3 Conditional ICAPM with Risk and Uncertainty Merton s ICAPM: µ = A σ + B σ i im ix We examine conditional ICAPM with time-varying covariances: ER [ Ω ] = A cov[ R, R Ω ] + B cov[ R, X Ω ] it, + 1 t it, + 1 mt, + 1 t it, + 1 t+ 1 t Investors are concerned with Terminal wealth of portfolio Future consumption and investment opportunities.
4 Economic uncertainty index Jurado, Ludvigson, and Ng (2015) Uncertainty: conditional volatility of innovations 132 macroeconomic time series Real output and income Employment and hours Real retail, manufacturing and trade sales Consumer spending Housing starts etc. Computed on a one month, three month and one year basis
5 Economic uncertainty index / /1977 5/ /1988 4/ /1999 4/2005 9/2010 3/2016 One month ahead 3 months ahead 12 months ahead Source: Sydney Ludvigson
6 Uncertainty Beta Excess stock returns regressed on uncertainty index Sixty month rolling regressions R r = α + + ( R r ) + SMB MKT SMB it ft i i 1, t i MKT, t ft i t + HML + UMD + LIQ HML UMD LIQ i t i t i t + R + R + ε I / A ROE i I / A, t i ROE, t i, t
7 Equal weighted portfolios Rm - Rf FF 5 factor α FF 5+ factor α Low (3.60) (2.77) (2.85) High (2.06) (-1.31) (-1.49) Turan Bali, Stephen Brown and Yi Tang Is Economic Uncertainty Priced in the Cross-Section of Stock Returns Journal of Financial Economics 126(3)
8 Equal weighted portfolios Rm - Rf FF 5 factor α FF 5+ factor α Low (3.60) (2.77) (2.85) High (2.06) (-1.31) (-1.49) High-Low (-3.81) (-2.93) (-3.09) Turan Bali, Stephen Brown and Yi Tang Is Economic Uncertainty Priced in the Cross-Section of Stock Returns Journal of Financial Economics 126(3)
9 Value weighted portfolios Rm - Rf FF 5 factor α FF 5+ factor α Low (2.87) (2.14) (2.12) High (1.72) (-1.33) (-1.46)
10 Value weighted portfolios Rm - Rf FF 5 factor α FF 5+ factor α Low (2.87) (2.14) (2.12) High (1.72) (-1.33) (-1.46) High-Low (-1.93) (-2.35) (-2.40)
11 Alphas of different samples S&P500 1,000 Largest stocks 1,000 Most Liquid stocks Low (2.97) (2.33) (2.13) High (-1.72) (-1.20) (-1.21) FF 5+ factor α
12 Alphas of different samples S&P500 1,000 Largest stocks 1,000 Most Liquid stocks Low (2.97) (2.33) (2.13) High (-1.72) (-1.20) (-1.21) High-Low (-3.20) (-2.35) (-2.28) FF 5+ factor α
13 Premium controlling for other factors Controlling for Low High MKT SIZE BM I/A ROE MOM ILLIQ IVOL MAX
14 Premium controlling for other factors Controlling for Low High Difference MKT (-3.24) SIZE (-2.39) BM (-2.63) I/A (-2.54) ROE (-3.00) MOM (-3.72) ILLIQ (-2.45) IVOL (-3.84) MAX (-3.99)
15 Fama and McBeth results (-3.12)
16 Fama and McBeth results MKT (-3.12) (-3.22) (0.54)
17 Fama and McBeth results MKT (-3.12) (-3.22) (-2.73) (0.54) (1.58) SIZE (-2.18) BM (2.55) MOM (3.27) I/A (-4.50) ROE (3.32) Controls No No Yes
18 alphas by industry Quintile Low High Nondurable Durable Manufacturing Energy High tech Telecom Retail Health Utilities Other
19 alphas by industry Quintile Low High Difference Nondurable (-1.73) Durable (-1.99) Manufacturing (-1.63) Energy (-2.14) High tech (-2.31) Telecom (-3.25) Retail (-3.67) Health (-1.77) Utilities (-0.50) Other (-3.02)
20 Alphas of uncertainty beta factors FF 5 factor α FF 5+ factor α EW factor -0.35% -0.34% (-3.27) (-2.85) VW factor -.31% -.32% (-2.79) (2.46)
21 Recessions vs. Expansions Recession- NBER Expansion- NBER Recession- CFNAI Expansion- CFNAI EW factor (-1.67) (-3.39) (-2.52) (-2.14) High-low (-3.44) (-2.26) (-2.98) (-2.08) Analyst disagreement
22 Hedge fund application Economic uncertainty exposure explains hedge fund returns A significant relation between future returns and exposure to uncertainty Effect is greatest for directional fund strategies: R = δ ( δ ) it, 1 it, it, it, it, δ (2.78) (2.00) (0.94) (2.03) = 1 if fund is directional, δ = 0otherwise it, i it, Turan Bali, Stephen Brown and Mustafa Caglayan Macroeconomic risk and hedge fund returns Journal of Financial Economics 114(1)
23 Conclusion Uncertainty is both measurable and material Is distinct from market volatility Is associated with a negative premium in stock returns Stocks differ in their sensitivity to this factor Systematic differences in sensitivity by industry Uncertainty affects consumption and investment Increased uncertainty => unfavorable investment opportunities Uncertainty premium is higher in times of economic distress
Economic Uncertainty and the Cross-Section of Hedge Fund Returns
Economic Uncertainty and the Cross-Section of Hedge Fund Returns Turan Bali, Georgetown University Stephen Brown, New York University Mustafa Caglayan, Ozyegin University Introduction Knight (1921) draws
More informationBetting against Beta or Demand for Lottery
Turan G. Bali 1 Stephen J. Brown 2 Scott Murray 3 Yi Tang 4 1 McDonough School of Business, Georgetown University 2 Stern School of Business, New York University 3 College of Business Administration, University
More informationVolatility Appendix. B.1 Firm-Specific Uncertainty and Aggregate Volatility
B Volatility Appendix The aggregate volatility risk explanation of the turnover effect relies on three empirical facts. First, the explanation assumes that firm-specific uncertainty comoves with aggregate
More informationDisagreement in Economic Forecasts and Expected Stock Returns
Disagreement in Economic Forecasts and Expected Stock Returns Turan G. Bali Georgetown University Stephen J. Brown Monash University Yi Tang Fordham University Abstract We estimate individual stock exposure
More informationStocks with Extreme Past Returns: Lotteries or Insurance?
Stocks with Extreme Past Returns: Lotteries or Insurance? Alexander Barinov Terry College of Business University of Georgia June 14, 2013 Alexander Barinov (UGA) Stocks with Extreme Past Returns June 14,
More informationMacroeconomic Uncertainty and Expected Stock Returns
Macroeconomic Uncertainty and Expected Stock Returns Turan G. Bali Georgetown University Stephen J. Brown New York University Yi Tang Fordham University Abstract This paper introduces a broad index of
More informationSize Matters, if You Control Your Junk
Discussion of: Size Matters, if You Control Your Junk by: Cliff Asness, Andrea Frazzini, Ronen Israel, Tobias Moskowitz, and Lasse H. Pedersen Kent Daniel Columbia Business School & NBER AFA Meetings 7
More informationFinal Exam Suggested Solutions
University of Washington Fall 003 Department of Economics Eric Zivot Economics 483 Final Exam Suggested Solutions This is a closed book and closed note exam. However, you are allowed one page of handwritten
More informationDepartment of Finance Working Paper Series
NEW YORK UNIVERSITY LEONARD N. STERN SCHOOL OF BUSINESS Department of Finance Working Paper Series FIN-03-005 Does Mutual Fund Performance Vary over the Business Cycle? Anthony W. Lynch, Jessica Wachter
More informationOne-Factor Asset Pricing
One-Factor Asset Pricing with Stefanos Delikouras (University of Miami) Alex Kostakis MBS 12 January 217, WBS Alex Kostakis (MBS) One-Factor Asset Pricing 12 January 217, WBS 1 / 32 Presentation Outline
More informationArbitrage Asymmetry and the Idiosyncratic Volatility Puzzle
Arbitrage Asymmetry and the Idiosyncratic Volatility Puzzle Robert F. Stambaugh, The Wharton School, University of Pennsylvania and NBER Jianfeng Yu, Carlson School of Management, University of Minnesota
More informationLong and Short Run Correlation Risk in Stock Returns
Long and Short Run Correlation Risk in Stock Returns Discussion by Ric Colacito Econometric Society Winter Meetings, Denver, 1/2011 1 / 10 Contribution 1 Background: market variance risk premium predicts
More informationThe New Issues Puzzle
The New Issues Puzzle Professor B. Espen Eckbo Advanced Corporate Finance, 2009 Contents 1 IPO Sample and Issuer Characteristics 1 1.1 Annual Sample Distribution................... 1 1.2 IPO Firms are
More informationArbitrage Pricing Theory and Multifactor Models of Risk and Return
Arbitrage Pricing Theory and Multifactor Models of Risk and Return Recap : CAPM Is a form of single factor model (one market risk premium) Based on a set of assumptions. Many of which are unrealistic One
More informationDiscount Rates. John H. Cochrane. January 8, University of Chicago Booth School of Business
Discount Rates John H. Cochrane University of Chicago Booth School of Business January 8, 2011 Discount rates 1. Facts: How risk discount rates vary over time and across assets. 2. Theory: Why discount
More informationDoes market liquidity explain the idiosyncratic volatility puzzle in the Chinese stock market?
Does market liquidity explain the idiosyncratic volatility puzzle in the Chinese stock market? Xiaoxing Liu Guangping Shi Southeast University, China Bin Shi Acadian-Asset Management Disclosure The views
More informationThe Norwegian State Equity Ownership
The Norwegian State Equity Ownership B A Ødegaard 15 November 2018 Contents 1 Introduction 1 2 Doing a performance analysis 1 2.1 Using R....................................................................
More informationCHAPTER 10. Arbitrage Pricing Theory and Multifactor Models of Risk and Return INVESTMENTS BODIE, KANE, MARCUS
CHAPTER 10 Arbitrage Pricing Theory and Multifactor Models of Risk and Return INVESTMENTS BODIE, KANE, MARCUS McGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved. INVESTMENTS
More informationOne-Factor Asset Pricing
One-Factor Asset Pricing with Stefanos Delikouras (University of Miami) Alex Kostakis Manchester June 2017, WFA (Whistler) Alex Kostakis (Manchester) One-Factor Asset Pricing June 2017, WFA (Whistler)
More informationJohn H. Cochrane. April University of Chicago Booth School of Business
Comments on "Volatility, the Macroeconomy and Asset Prices, by Ravi Bansal, Dana Kiku, Ivan Shaliastovich, and Amir Yaron, and An Intertemporal CAPM with Stochastic Volatility John Y. Campbell, Stefano
More informationCross Sectional Variation of Stock Returns: Idiosyncratic Risk and Liquidity
Cross Sectional Variation of Stock Returns: Idiosyncratic Risk and Liquidity by Matthew Spiegel Xiaotong (Vivian) Wang Cross Sectional Returns via Market Microstructure Liquidity Returns Liquidity varies
More informationThe Common Factor in Idiosyncratic Volatility:
The Common Factor in Idiosyncratic Volatility: Quantitative Asset Pricing Implications Bryan Kelly University of Chicago Booth School of Business (with Bernard Herskovic, Hanno Lustig, and Stijn Van Nieuwerburgh)
More informationWhat Does Risk-Neutral Skewness Tell Us About Future Stock Returns? Supplementary Online Appendix
What Does Risk-Neutral Skewness Tell Us About Future Stock Returns? Supplementary Online Appendix 1 Tercile Portfolios The main body of the paper presents results from quintile RNS-sorted portfolios. Here,
More informationHedging Factor Risk Preliminary Version
Hedging Factor Risk Preliminary Version Bernard Herskovic, Alan Moreira, and Tyler Muir March 15, 2018 Abstract Standard risk factors can be hedged with minimal reduction in average return. This is true
More informationLiquidity Creation as Volatility Risk
Liquidity Creation as Volatility Risk Itamar Drechsler, NYU and NBER Alan Moreira, Rochester Alexi Savov, NYU and NBER JHU Carey Finance Conference June, 2018 1 Liquidity and Volatility 1. Liquidity creation
More informationState Ownership at the Oslo Stock Exchange
State Ownership at the Oslo Stock Exchange Bernt Arne Ødegaard 1 Introduction We ask whether there is a state rebate on companies listed on the Oslo Stock Exchange, i.e. whether companies where the state
More informationA Lottery Demand-Based Explanation of the Beta Anomaly. Online Appendix
A Lottery Demand-Based Explanation of the Beta Anomaly Online Appendix Section I provides details of the calculation of the variables used in the paper. Section II examines the robustness of the beta anomaly.
More informationPredicting the Equity Premium with Implied Volatility Spreads
Predicting the Equity Premium with Implied Volatility Spreads Charles Cao, Timothy Simin, and Han Xiao Department of Finance, Smeal College of Business, Penn State University Department of Economics, Penn
More informationAddendum. Multifactor models and their consistency with the ICAPM
Addendum Multifactor models and their consistency with the ICAPM Paulo Maio 1 Pedro Santa-Clara This version: February 01 1 Hanken School of Economics. E-mail: paulofmaio@gmail.com. Nova School of Business
More informationCHAPTER 10. Arbitrage Pricing Theory and Multifactor Models of Risk and Return INVESTMENTS BODIE, KANE, MARCUS
CHAPTER 10 Arbitrage Pricing Theory and Multifactor Models of Risk and Return McGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved. 10-2 Single Factor Model Returns on
More informationFoundations of Finance
Lecture 5: CAPM. I. Reading II. Market Portfolio. III. CAPM World: Assumptions. IV. Portfolio Choice in a CAPM World. V. Individual Assets in a CAPM World. VI. Intuition for the SML (E[R p ] depending
More informationEmpirics of the Oslo Stock Exchange:. Asset pricing results
Empirics of the Oslo Stock Exchange:. Asset pricing results. 1980 2016. Bernt Arne Ødegaard Jan 2017 Abstract We show the results of numerous asset pricing specifications on the crossection of assets at
More informationThe High Idiosyncratic Volatility Low Return Puzzle
The High Idiosyncratic Volatility Low Return Puzzle Hai Lu, Kevin Wang, and Xiaolu Wang Joseph L. Rotman School of Management University of Toronto NTU International Conference, December, 2008 What is
More informationMultifactor models and their consistency with the ICAPM
Multifactor models and their consistency with the ICAPM Paulo Maio 1 Pedro Santa-Clara 2 This version: February 2012 3 1 Hanken School of Economics. E-mail: paulofmaio@gmail.com. 2 Nova School of Business
More informationHigh Idiosyncratic Volatility and Low Returns. Andrew Ang Columbia University and NBER. Q Group October 2007, Scottsdale AZ
High Idiosyncratic Volatility and Low Returns Andrew Ang Columbia University and NBER Q Group October 2007, Scottsdale AZ Monday October 15, 2007 References The Cross-Section of Volatility and Expected
More informationMedia content for value and growth stocks
Media content for value and growth stocks Marie Lambert Nicolas Moreno Liège University - HEC Liège September 2017 Marie Lambert & Nicolas Moreno Media content for value and growth stocks September 2017
More informationAsset Pricing Implications of the Volatility Term Structure. Chen Xie
Asset Pricing Implications of the Volatility Term Structure Chen Xie Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy under the Executive Committee in the Graduate
More informationExploiting Factor Autocorrelation to Improve Risk Adjusted Returns
Exploiting Factor Autocorrelation to Improve Risk Adjusted Returns Kevin Oversby 22 February 2014 ABSTRACT The Fama-French three factor model is ubiquitous in modern finance. Returns are modeled as a linear
More informationIndex Models and APT
Index Models and APT (Text reference: Chapter 8) Index models Parameter estimation Multifactor models Arbitrage Single factor APT Multifactor APT Index models predate CAPM, originally proposed as a simplification
More informationShould Benchmark Indices Have Alpha? Revisiting Performance Evaluation. Martijn Cremers (Yale) Antti Petajisto (Yale) Eric Zitzewitz (Dartmouth)
Should Benchmark Indices Have Alpha? Revisiting Performance Evaluation Martijn Cremers (Yale) Antti Petajisto (Yale) Eric Zitzewitz (Dartmouth) How Would You Evaluate These Funds? Regress 3 stock portfolios
More informationAppendix A. Online Appendix
Appendix A. Online Appendix In this appendix, we present supplementary results for our methodology in which we allow loadings of characteristics on factors to vary over time. That is, we replace equation
More informationInterpreting factor models
Discussion of: Interpreting factor models by: Serhiy Kozak, Stefan Nagel and Shrihari Santosh Kent Daniel Columbia University, Graduate School of Business 2015 AFA Meetings 4 January, 2015 Paper Outline
More informationMeasuring Performance with Factor Models
Measuring Performance with Factor Models Bernt Arne Ødegaard February 21, 2017 The Jensen alpha Does the return on a portfolio/asset exceed its required return? α p = r p required return = r p ˆr p To
More informationVolatility Jump Risk in the Cross-Section of Stock Returns. Yu Li University of Houston. September 29, 2017
Volatility Jump Risk in the Cross-Section of Stock Returns Yu Li University of Houston September 29, 2017 Abstract Jumps in aggregate volatility has been established as an important factor affecting the
More informationUpside Potential of Hedge Funds as a Predictor of Future Performance
Upside Potential of Hedge Funds as a Predictor of Future Performance Turan G. Bali, Stephen J. Brown, Mustafa O. Caglayan January 7, 2018 American Finance Association (AFA) Philadelphia, PA 1 Introduction
More informationFinancial Distress and the Cross Section of Equity Returns
Financial Distress and the Cross Section of Equity Returns Lorenzo Garlappi University of Texas Austin Hong Yan University of South Carolina National University of Singapore May 20, 2009 Motivation Empirical
More informationPredictability of Stock Returns
Predictability of Stock Returns Ahmet Sekreter 1 1 Faculty of Administrative Sciences and Economics, Ishik University, Iraq Correspondence: Ahmet Sekreter, Ishik University, Iraq. Email: ahmet.sekreter@ishik.edu.iq
More informationGold Betas. Vijay Gondhalekar * and Lawrence Blose. Seidman College of Business, Grand Valley State University
Gold Betas Vijay Gondhalekar * and Lawrence Blose Seidman College of Business, Grand Valley State University Abstract On the basis of daily returns, gold exhibits no sensitivity to the market factor, SMB,
More informationState Ownership at the Oslo Stock Exchange. Bernt Arne Ødegaard
State Ownership at the Oslo Stock Exchange Bernt Arne Ødegaard Introduction We ask whether there is a state rebate on companies listed on the Oslo Stock Exchange, i.e. whether companies where the state
More informationAn Analysis of Theories on Stock Returns
An Analysis of Theories on Stock Returns Ahmet Sekreter 1 1 Faculty of Administrative Sciences and Economics, Ishik University, Erbil, Iraq Correspondence: Ahmet Sekreter, Ishik University, Erbil, Iraq.
More informationAre there common factors in individual commodity futures returns?
Are there common factors in individual commodity futures returns? Recent Advances in Commodity Markets (QMUL) Charoula Daskalaki (Piraeus), Alex Kostakis (MBS) and George Skiadopoulos (Piraeus & QMUL)
More informationArbitrage Asymmetry and the Idiosyncratic Volatility Puzzle
Arbitrage Asymmetry and the Idiosyncratic Volatility Puzzle Robert F. Stambaugh The Wharton School University of Pennsylvania and NBER Jianfeng Yu Carlson School of Management University of Minnesota Yu
More informationOverview of Concepts and Notation
Overview of Concepts and Notation (BUSFIN 4221: Investments) - Fall 2016 1 Main Concepts This section provides a list of questions you should be able to answer. The main concepts you need to know are embedded
More informationEquity risk factors and the Intertemporal CAPM
Equity risk factors and the Intertemporal CAPM Ilan Cooper 1 Paulo Maio 2 This version: February 2015 3 1 Norwegian Business School (BI), Department of Financial Economics. E-mail: ilan.cooper@bi.no Hanken
More informationThe Asymmetric Conditional Beta-Return Relations of REITs
The Asymmetric Conditional Beta-Return Relations of REITs John L. Glascock 1 University of Connecticut Ran Lu-Andrews 2 California Lutheran University (This version: August 2016) Abstract The traditional
More informationBessembinder / Zhang (2013): Firm characteristics and long-run stock returns after corporate events. Discussion by Henrik Moser April 24, 2015
Bessembinder / Zhang (2013): Firm characteristics and long-run stock returns after corporate events Discussion by Henrik Moser April 24, 2015 Motivation of the paper 3 Authors review the connection of
More informationAnalyst Disagreement and Aggregate Volatility Risk
Analyst Disagreement and Aggregate Volatility Risk Alexander Barinov Terry College of Business University of Georgia April 15, 2010 Alexander Barinov (Terry College) Disagreement and Volatility Risk April
More informationApplied Macro Finance
Master in Money and Finance Goethe University Frankfurt Week 2: Factor models and the cross-section of stock returns Fall 2012/2013 Please note the disclaimer on the last page Announcements Next week (30
More informationOptimal Portfolio Inputs: Various Methods
Optimal Portfolio Inputs: Various Methods Prepared by Kevin Pei for The Fund @ Sprott Abstract: In this document, I will model and back test our portfolio with various proposed models. It goes without
More informationFIN822 project 3 (Due on December 15. Accept printout submission or submission )
FIN822 project 3 (Due on December 15. Accept printout submission or email submission donglinli2006@yahoo.com. ) Part I The Fama-French Multifactor Model and Mutual Fund Returns Dawn Browne, an investment
More informationNHY examples. Bernt Arne Ødegaard. 23 November Estimating dividend growth in Norsk Hydro 8
NHY examples Bernt Arne Ødegaard 23 November 2017 Abstract Finance examples using equity data for Norsk Hydro (NHY) Contents 1 Calculating Beta 4 2 Cost of Capital 7 3 Estimating dividend growth in Norsk
More informationWhat is Venture Capital?
Venture Capital Topics Covered Definition of Venture Capital Activities of Venture Capitalists Organization Structure of Venture Capital History of Venture Capital Patterns of Venture Capital Investment
More informationImplied Funding Liquidity
Implied Funding Liquidity Minh Nguyen Yuanyu Yang Newcastle University Business School 3 April 2017 1 / 17 Outline 1 Background 2 Summary 3 Implied Funding Liquidity Measure 4 Data 5 Empirical Results
More informationVolatility-of-Volatility Risk and Asset Prices
olatility-of-olatility Risk and Asset Prices Te-Feng Chen National Taiwan University, Taipei, Taiwan Tel: (+886) 2-3366-1100 Email: d94723008@ntu.edu.tw San-Lin Chung National Taiwan University, Taipei,
More informationPortfolio Risk Management and Linear Factor Models
Chapter 9 Portfolio Risk Management and Linear Factor Models 9.1 Portfolio Risk Measures There are many quantities introduced over the years to measure the level of risk that a portfolio carries, and each
More informationReal Time Macro Factors in Bond Risk Premium
Real Time Macro Factors in Bond Risk Premium Dashan Huang Singapore Management University Fuwei Jiang Central University of Finance and Economics Guoshi Tong Renmin University of China September 20, 2018
More informationOptimal Debt-to-Equity Ratios and Stock Returns
Utah State University DigitalCommons@USU All Graduate Plan B and other Reports Graduate Studies 5-2014 Optimal Debt-to-Equity Ratios and Stock Returns Courtney D. Winn Utah State University Follow this
More informationB35150 Winter 2014 Quiz Solutions
B35150 Winter 2014 Quiz Solutions Alexander Zentefis March 16, 2014 Quiz 1 0.9 x 2 = 1.8 0.9 x 1.8 = 1.62 Quiz 1 Quiz 1 Quiz 1 64/ 256 = 64/16 = 4%. Volatility scales with square root of horizon. Quiz
More informationThe Equity Premium. Bernt Arne Ødegaard. 20 September 2018
The Equity Premium Bernt Arne Ødegaard 20 September 2018 1 Intro This lecture is concerned with the Equity Premium: How much more return an investor requires to hold a risky security (such as a stock)
More informationTopic Nine. Evaluation of Portfolio Performance. Keith Brown
Topic Nine Evaluation of Portfolio Performance Keith Brown Overview of Performance Measurement The portfolio management process can be viewed in three steps: Analysis of Capital Market and Investor-Specific
More informationLottery Preferences and the Idiosyncratic Volatility Puzzle* Doina C. Chichernea University of Denver
Lottery Preferences and the Idiosyncratic Volatility Puzzle* Doina C. Chichernea University of Denver Haimanot Kassa Miami University and the U.S. Securities and Exchange Commission Steve L. Slezak University
More informationAppendix. In this Appendix, we present the construction of variables, data source, and some empirical procedures.
Appendix In this Appendix, we present the construction of variables, data source, and some empirical procedures. A.1. Variable Definition and Data Source Variable B/M CAPX/A Cash/A Cash flow volatility
More informationIs Stock Return Predictability of Option-implied Skewness Affected by the Market State?
Is Stock Return Predictability of Option-implied Skewness Affected by the Market State? Heewoo Park and Tongsuk Kim * Korea Advanced Institute of Science and Technology 2016 ABSTRACT We use Bakshi, Kapadia,
More informationImports, Exports, Dollar Exposures, and Stock Returns
Imports, Exports, Dollar Exposures, and Stock Returns Suparna Chakrabortya a, Yi Tang b, Liuren Wu a a Baruch College and b Fordham University April 20, 2012 The Fifth Annual Triple Crown Finance Conference
More informationThe Idiosyncratic Volatility Puzzle: A Behavioral Explanation
Utah State University DigitalCommons@USU All Graduate Plan B and other Reports Graduate Studies 5-2015 The Idiosyncratic Volatility Puzzle: A Behavioral Explanation Brad Cannon Utah State University Follow
More informationMicroéconomie de la finance
Microéconomie de la finance 7 e édition Christophe Boucher christophe.boucher@univ-lorraine.fr 1 Chapitre 6 7 e édition Les modèles d évaluation d actifs 2 Introduction The Single-Index Model - Simplifying
More informationINTERTEMPORAL ASSET ALLOCATION: THEORY
INTERTEMPORAL ASSET ALLOCATION: THEORY Multi-Period Model The agent acts as a price-taker in asset markets and then chooses today s consumption and asset shares to maximise lifetime utility. This multi-period
More informationCross-Sectional Dispersion and Expected Returns
Cross-Sectional Dispersion and Expected Returns Thanos Verousis a and Nikolaos Voukelatos b a Newcastle University Business School, Newcastle University b Kent Business School, University of Kent Abstract
More informationTime-variation of CAPM betas across market volatility regimes for Book-to-market and Momentum portfolios
Time-variation of CAPM betas across market volatility regimes for Book-to-market and Momentum portfolios Azamat Abdymomunov James Morley Department of Economics Washington University in St. Louis October
More informationLabor-Technology Substitution: Implications for Asset Pricing. Miao Ben Zhang University of Southern California
Labor-Technology Substitution: Implications for Asset Pricing Miao Ben Zhang University of Southern California Background Routine-task labor: workers performing procedural and rule-based tasks. Tax preparers
More informationFinansavisen A case study of secondary dissemination of insider trade notifications
Finansavisen A case study of secondary dissemination of insider trade notifications B Espen Eckbo and Bernt Arne Ødegaard Oct 2015 Abstract We consider a case of secondary dissemination of insider trades.
More informationCommon Macro Factors and Their Effects on U.S Stock Returns
2011 Common Macro Factors and Their Effects on U.S Stock Returns IBRAHIM CAN HALLAC 6/22/2011 Title: Common Macro Factors and Their Effects on U.S Stock Returns Name : Ibrahim Can Hallac ANR: 374842 Date
More informationPaulo Maio 1. First draft: October This version: January
Do stock return factors outperform other risk factors? Evidence from a large cross-section of anomalies Paulo Maio 1 First draft: October 2014 This version: January 2015 2 1 Hanken School of Economics,
More informationInternet Appendix to Leverage Constraints and Asset Prices: Insights from Mutual Fund Risk Taking
Internet Appendix to Leverage Constraints and Asset Prices: Insights from Mutual Fund Risk Taking In this Internet Appendix, we provide further discussion and additional empirical results to evaluate robustness
More informationEconomics of Behavioral Finance. Lecture 3
Economics of Behavioral Finance Lecture 3 Security Market Line CAPM predicts a linear relationship between a stock s Beta and its excess return. E[r i ] r f = β i E r m r f Practically, testing CAPM empirically
More informationRobust Econometric Inference for Stock Return Predictability
Robust Econometric Inference for Stock Return Predictability Alex Kostakis (MBS), Tassos Magdalinos (Southampton) and Michalis Stamatogiannis (Bath) Alex Kostakis, MBS 2nd ISNPS, Cadiz (Alex Kostakis,
More informationDaily Winners and Losers by Alok Kumar, Stefan Ruenzi, and Michael Ungeheuer
Daily Winners and Losers by Alok Kumar, Stefan Ruenzi, and Michael Ungeheuer American Finance Association Annual Meeting 2018 Philadelphia January 7 th 2018 1 In the Media: Wall Street Journal Print Rankings
More informationBetting Against Correlation:
Betting Against Correlation: Testing Making Theories Leverage for Aversion the Low-Risk Great Again Effect (#MLAGA) Clifford S. Asness Managing and Founding Principal For Institutional Investor Use Only
More informationDoes Idiosyncratic Volatility Proxy for Risk Exposure?
Does Idiosyncratic Volatility Proxy for Risk Exposure? Zhanhui Chen Nanyang Technological University Ralitsa Petkova Purdue University We decompose aggregate market variance into an average correlation
More informationThe Cross-Section of Credit Risk Premia and Equity Returns
The Cross-Section of Credit Risk Premia and Equity Returns Nils Friewald Christian Wagner Josef Zechner WU Vienna Swissquote Conference on Asset Management October 21st, 2011 Questions that we ask in the
More informationA Study to Check the Applicability of Fama and French, Three-Factor Model on S&P BSE- 500 Index
International Journal of Management, IT & Engineering Vol. 8 Issue 1, January 2018, ISSN: 2249-0558 Impact Factor: 7.119 Journal Homepage: Double-Blind Peer Reviewed Refereed Open Access International
More informationGrowth Opportunities, Investment-Specific Technology Shocks and the Cross-Section of Stock Returns
Growth Opportunities, Investment-Specific Technology Shocks and the Cross-Section of Stock Returns Leonid Kogan 1 Dimitris Papanikolaou 2 1 MIT and NBER 2 Northwestern University Boston, June 5, 2009 Kogan,
More informationThe Capital Asset Pricing Model CAPM: benchmark model of the cost of capital
70391 - Finance The Capital Asset Pricing Model CAPM: benchmark model of the cost of capital 70391 Finance Fall 2016 Tepper School of Business Carnegie Mellon University c 2016 Chris Telmer. Some content
More informationThe debate on NBIM and performance measurement, or the factor wars of 2015
The debate on NBIM and performance measurement, or the factor wars of 2015 May 2016 Bernt Arne Ødegaard University of Stavanger (UiS) How to think about NBIM Principal: People of Norway Drawing by Arild
More informationAn Intertemporal Capital Asset Pricing Model
I. Assumptions Finance 400 A. Penati - G. Pennacchi Notes on An Intertemporal Capital Asset Pricing Model These notes are based on the article Robert C. Merton (1973) An Intertemporal Capital Asset Pricing
More informationThe Cross-Section of Risk and Return.
November 27, 2017 Comments Welcome The Cross-Section of Risk and Return. Kent Daniel, Lira Mota, Simon Rottke, and Tano Santos - Abstract - In the finance literature, a common practice is to create factor-portfolios
More information** Department of Accounting and Finance Faculty of Business and Economics PO Box 11E Monash University Victoria 3800 Australia
CORPORATE USAGE OF FINANCIAL DERIVATIVES AND INFORMATION ASYMMETRY Hoa Nguyen*, Robert Faff** and Alan Hodgson*** * School of Accounting, Economics and Finance Faculty of Business and Law Deakin University
More informationLow Risk Anomalies? Discussion
Low Risk Anomalies? by Schneider, Wagners, and Zechner Discussion Pietro Veronesi The University of Chicago Booth School of Business Main Contribution and Outline of Discussion Main contribution of the
More informationTARGET DATE FUNDS. Characteristics and Performance. Edwin J Elton Martin J Gruber NYU Stern School of Business
TARGET DATE FUNDS Characteristics and Performance Edwin J Elton Martin J Gruber NYU Stern School of Business Andre de Souza Christopher R Blake Fordham University What We Know: There is a vast literature
More informationUnderstanding Volatility Risk
Understanding Volatility Risk John Y. Campbell Harvard University ICPM-CRR Discussion Forum June 7, 2016 John Y. Campbell (Harvard University) Understanding Volatility Risk ICPM-CRR 2016 1 / 24 Motivation
More information