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A Critical Investigation Of The Explanatory Role Of Factor Mimicking Portfolios In Multifactor Asset Pricing Models
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Book Synopsis A Critical Investigation of the Explanatory Role of Factor Mimicking Portfolios in Multifactor Asset Pricing Models by : Hossein Asgharian
Download or read book A Critical Investigation of the Explanatory Role of Factor Mimicking Portfolios in Multifactor Asset Pricing Models written by Hossein Asgharian and published by . This book was released on 2002 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: The common approach for constructing factor mimicking portfolios is to go long in assets with high loadings and to short-sell those with low loadings on some background factors. As a result portfolios containing stocks with low loading on the background factor receive negative betas against the corresponding mimicking portfolio. Thus, such portfolios appear as hedges against the background risk and may in tests of asset pricing models receive significant positive intercepts. The final result regarding acceptance or rejection of an asset pricing model may therefore to some extent be understood as a random outcome.
Book Synopsis Innovative Techniques in Instruction Technology, E-learning, E-assessment and Education by : Magued Iskander
Download or read book Innovative Techniques in Instruction Technology, E-learning, E-assessment and Education written by Magued Iskander and published by Springer Science & Business Media. This book was released on 2008-08-20 with total page 613 pages. Available in PDF, EPUB and Kindle. Book excerpt: Innovative Techniques in Instruction Technology, E-Learning, E-Assessment and Education is a collection of world-class paper articles addressing the following topics: (1) E-Learning including development of courses and systems for technical and liberal studies programs; online laboratories; intelligent testing using fuzzy logic; evaluation of on line courses in comparison to traditional courses; mediation in virtual environments; and methods for speaker verification. (2) Instruction Technology including internet textbooks; pedagogy-oriented markup languages; graphic design possibilities; open source classroom management software; automatic email response systems; tablet-pcs; personalization using web mining technology; intelligent digital chalkboards; virtual room concepts for cooperative scientific work; and network technologies, management, and architecture. (3) Science and Engineering Research Assessment Methods including assessment of K-12 and university level programs; adaptive assessments; auto assessments; assessment of virtual environments and e-learning. (4) Engineering and Technical Education including cap stone and case study course design; virtual laboratories; bioinformatics; robotics; metallurgy; building information modeling; statistical mechanics; thermodynamics; information technology; occupational stress and stress prevention; web enhanced courses; and promoting engineering careers. (5) Pedagogy including benchmarking; group-learning; active learning; teaching of multiple subjects together; ontology; and knowledge representation. (6) Issues in K-12 Education including 3D virtual learning environment for children; e-learning tools for children; game playing and systems thinking; and tools to learn how to write foreign languages.
Book Synopsis Asset Pricing Factor Models in the German Stock Market by : Julian Fischer
Download or read book Asset Pricing Factor Models in the German Stock Market written by Julian Fischer and published by GRIN Verlag. This book was released on 2021-06-14 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2021 in the subject Business economics - Investment and Finance, grade: 1,7, University of Hannover (Institut für Finanzwirtschaft und Rohstoffmärkte), language: English, abstract: In this paper, we examine how various modern multifactor models, such as the Carhart factor model, five-factor model and its complement six-factor model by Fama and French, the q-factor model by Hou, Wue and Zhang, and the mispricing factor model by Stambaugh and Yuan perform in the German stock market. It is discernible that, depending on the application model, like factor spanning tests, different sortings, return anomalies, sector- and equity fund investigation, they often provide quite similar explanatory power, while in individual cases sometimes one and sometimes the other model performs better. The underlying factors contribute differently to the explanatory power depending on the time period. Thus, in case of doubt, the six-factor model is preferable, as it is the most versatile model. Since the establishment of the capital asset pricing model as a cornerstone of modern capital market theory in the 1960s, new investigations and studies have been built on this model on an ongoing basis. This continuously leads to extensions and modifications of the asset pricing models since then. These models can be used in various ways, for example to explain the pricing of risky financial assets under restrictive assumptions or to gain important insights into the relationship between expected return and risk of securities. These can be used in various ways, for example to explain the pricing of risky financial assets under restrictive assumptions or to gain important insights into the relationship between expected return and risk of securities. In this paper, we aim to answer the overarching research question of how modern asset pricing models perform for the German stock market. For this purpose, we first discuss the characteristics of the German stock market, followed by the milestones of the development of factor models, their empirical evidence and their factors, as well as internationally known return anomalies. In the subsequent part, five modern asset pricing models are tested in different scenarios of the German stock market, including factor spanning tests, different sortings, anomalies, sectors and in equity funds. For this purpose, various analytical methods are used and performed with the software “Stata”. Finally, the comprehensive results are summarized and concluded.
Download or read book Finance India written by and published by . This book was released on 2006 with total page 1706 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Empirical Analysis of Multifactor Asset Pricing Models. A Comparison of US and Japanese REITs by : Tim Perschbacher
Download or read book Empirical Analysis of Multifactor Asset Pricing Models. A Comparison of US and Japanese REITs written by Tim Perschbacher and published by GRIN Verlag. This book was released on 2023-07-10 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2021 in the subject Business economics - Investment and Finance, grade: 1,0, , language: English, abstract: This study is concerned with an empirical analysis of asset pricing. More specifically, this paper examines whether multifactor asset pricing models are able to explain variation in REIT returns in the US and Japan. In addition to traditional multifactor models, an Alternative Four-Factor Model (AFF) was developed considering net profit margin as an additional risk factor. Thence, this paper seeks to provide valuable information for investors and fund managers regarding their indirect real estate investment selection. Using a sample period between July 1994 (US) / July 2011 (Japan) to December 2020, rigorous multiple-time-series regression is applied to calculate factor loadings for each risk factor and the corresponding alpha values of each model to evaluate their effectiveness in explaining variation and cross-section of REIT returns. Most studies on asset pricing models focus on size and value sorted portfolios as dependent variables. This paper broadens the approach with four other double sorted test portfolios to check the robustness of each single factor to explain return anomalies. Results show that market premium and size premium represent risk factors for US-REITs, whereas market premium and value premium are suitable risk factors for Japanese-REITs. The momentum factor does not capture risk and is insignificant in both markets. The study shows low correlations between traditional and REIT specific as well as between US and Japanese risk factors. This suggests that firstly risk factors are country specific and secondly that they are asset specific. Moreover, the Fama-French Three-Factor Model (FF3) clearly outperforms the CAPM, while the Carhart Four-Factor Model (CH4) marginally improves the explanatory power over the FF3. This is observed in both markets. Outcomes demonstrate that the Alternative Four-Factor Model (AAF) does not improve prediction power for returns of Japanese-REITs compared to the FF3 and CH4. On the contrary, results are ambiguous concerning US-REITs. While the additional risk factor, net profit margin, generates a negative return, the model is superior to the FF3 and CH4 in terms of explaining variation and cross-section of returns.
Book Synopsis Comparison of the CAPM, the Fama-French Three Factor Model and Modifications by : Christoph Lohrmann
Download or read book Comparison of the CAPM, the Fama-French Three Factor Model and Modifications written by Christoph Lohrmann and published by GRIN Verlag. This book was released on 2015-08-18 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2014 in the subject Economics - Finance, grade: 6,0 (Schweizer Notensystem), University of Liechtenstein, früher Hochschule Liechtenstein, language: English, abstract: This paper is focused on comparing the Capital Asset Pricing Model, the Fama-French Three Factor model and two modified versions of the Fama-French Model in their ability to explain excess returns. The first modified model contains the same explanatory variables as the Fama-French Model but with an additional AR(1) process. The second modification contains instead of an additional AR(1) an AR(2) process. Evaluated by the adjusted R2 and the Akaike information criterion, the Fama-French model yields a higher model-fit than the CAPM. The modified Fama-French Model with an AR(2) process leads to significant results for the twice lagged return in the model in four out of six tested portfolios. Therefore, the in-sample regression reveals a higher model-fit of the modified Fama-French model with AR(2) in comparison to the other three models. Since the results differ from a regression in the subsequent period, the results are most likely spurious. Nevertheless, the authors show the high-er model-fit of the Fama-French Three Factor Model in relation to the CAPM.
Book Synopsis Multifactor Assets Pricing Model by : Khushboo Sagar
Download or read book Multifactor Assets Pricing Model written by Khushboo Sagar and published by . This book was released on 2020 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Generous consideration has been pursued to the empirical testing of multi factor assets pricing models. However, literature provides mixed kind of evidences in the support of multi factor assets pricing model. This study reviews 20 research articles based on multi factor assets pricing model and examines 25 research papers based on the empirically testing of multi factor assets pricing model published during 2001 and 2018 to study the multi factor assets pricing model in the Indian context as well as foreign context. CAPM is a popular normative model used by researchers to explain the relationship between risk and expected return of a risky asset which was developed by Sharpe (1964) and Lintner (1965). This model takes only one risk factor which is the excess market portfolio return (Market premium). Because of poor performance of CAPM in explaining realized returns, the Fama and French three factor asset pricing model (1993) was developed. Fama and French (1993) documented the size effect and the value effect that were not included in the CAPM, generally known as CAPM anomalies. Mark M. Carhart (1997) developed the Carhart four factor model. It is an extension of the FF three factor model with one another factor i.e. momentum factor effect for asset pricing of stocks. In view of the limitations of the earlier three-factor model, Fama and French five-factor asset pricing model (2014) was developed. Fama and French (2014) came with profitability pattern and investment pattern in average stock return along with the market premium, size premium and value premium. This paper may be an expedient source of information to the academics, financial analyst and researchers to understand the asset pricing model.
Book Synopsis A Comparative Analysis of Ability of Mimicking Portfolios in Representing the Background Factors by : Hossein Asgharian
Download or read book A Comparative Analysis of Ability of Mimicking Portfolios in Representing the Background Factors written by Hossein Asgharian and published by . This book was released on 2017 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: Our aim is to give a comparative analysis of ability of different factor mimicking portfolios in representing the background factors. Our analysis contains a cross-sectional regression approach, a time-series regression approach and a portfolio approach for constructing factor mimicking portfolios. The focus of the analysis is the power of mimicking portfolios in the asset pricing models. We conclude that the time series regression approach, with the book-to-market sorted portfolios as the base assets, is the most proper alternative to construct mimicking portfolios for factors for which a time-series of factor realisation is available. To construct mimicking portfolios based on the firm characteristics we suggest a loading weighted portfolio approach.
Book Synopsis Macro Factor Mimicking Portfolios by : Emmanuel Jurczenko
Download or read book Macro Factor Mimicking Portfolios written by Emmanuel Jurczenko and published by . This book was released on 2019 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: The estimation of risk factors and their replication through mimicking portfolios are of critical importance for academics and practitioners in finance. We propose a general optimization framework to construct macro factor mimicking portfolios that encompasses existing portfolio mimicking approaches, such as two-pass cross-sectional regression models (Fama and MacBeth, 1973) and maximal correlation approaches (Huberman et al., 1987, and Lamont, 2001). We incorporate empirical estimation improvements through machine learning methodologies. We provide an application to the construction of tradable portfolios mimicking three global macro factors, namely growth, inflation surprises, and financial stress indicators. We show how these macro mimicking factors can be used to improve the risk-return profile of a typical endowment multi-asset portfolio.
Book Synopsis A Factor Portfolio Asset Pricing Model Based on the Optimal Distribution of Risk and Return by : Dixin Zhang
Download or read book A Factor Portfolio Asset Pricing Model Based on the Optimal Distribution of Risk and Return written by Dixin Zhang and published by . This book was released on 2017 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: After analyzing the relationship and risk type of factors, this paper proposes a new factor pricing model consisting of factor portfolios derived from the optimal distribution of risk and return. The new factor model outperforms the Sharp-Lintner (1964, 1965) CAPM, the Fama-French (1993) three-factor model, the Carhart (1997) four-factor model, the Hou-Xue-Zhang (2015) four-factor model and the Fama-French (2015, 2016) five-factor model in 16 of the 17 mimicking pricing portfolios. So far portfolios used for tests are limited and there are no studies investigating robustness of the models. To solve this problem, we propose using time-series simulation tests and anomaly portfolio reconstruction tests to conduct the robustness tests and GRS tests. The empirical results confirm our new factor models are more robust and has higher pricing power than others. The research of this paper is helpful to expand the modern financial pricing theory, and has a certain reference value for financial practice.
Book Synopsis Financial Portfolio Selection Using Multi-factor Capital Asset Pricing Model and Importing Options Data by : Mehmet F. Dicle
Download or read book Financial Portfolio Selection Using Multi-factor Capital Asset Pricing Model and Importing Options Data written by Mehmet F. Dicle and published by . This book was released on 2013 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: Diversification and portfolio selection is an integral part of finance teaching. In this study, multi-factor Capital Asset Pricing Model (CAPM) is estimated for components of Dow Jones Composite Index using data from Yahoo! Finance. Along with CAPM's Beta, other statistics are calculated that are common decision criteria for portfolio selection such as historic standard deviation (total risk), total return, average daily return, Sharpe and Treynor measures. Two new commands are introduced, components and portfolio, that automate the entire process. A third new command, fetchyahoooptions, is provided to download and parse equity options data from Yahoo! Finance web pages and, optionally, to calculate the implied volatilities for the downloaded options.
Book Synopsis Multi-Factor Models and Signal Processing Techniques by : Jay Emmanuelle
Download or read book Multi-Factor Models and Signal Processing Techniques written by Jay Emmanuelle and published by . This book was released on 2015 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper surveys the existing literature on the most widely-used factor models employed in the realm of financial asset pricing field. Through the concrete application of evaluating risks in the hedge fund industry, this paper demonstrates that signal processing techniques are an interesting alternative to the selection of factors and can provide more efficient estimation procedures than the classical ones.
Book Synopsis Evidence to Support Multifactor Asset Pricing Models by : Supriya Maheshwari
Download or read book Evidence to Support Multifactor Asset Pricing Models written by Supriya Maheshwari and published by . This book was released on 2016 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Emerging stock market returns have been extensively studied by academic community over the past two decades. However, there is still no consensus among the researchers and practitioners as to which asset pricing models should be used to explain returns in these markets. The basic objective of the study is to evaluate the power and performance of multi-factor asset pricing models (three and four factor model) over the traditional one factor CAPM, using the data from one of the fastest growing emerging market: India. The study using a large sample data of 470 listed stocks over a period of 16 years stretching from January 1997 to March 2013, evaluate the relevance of Fama and French three factor model as well as liquidity augmented four factor model in explaining the stock return variations in the Indian stock market. The study employs time series regression approach to examine the impact of market risk, size risk, value risk and liquidity risk on stock returns. The overall results of the study provide support to the multi-dimensional nature of risk and suggest the use of multi-factor asset pricing models for consideration in investment decisions. Both Fama and French three factor model and liquidity augmented four factor model were found to be superior than traditional one factor CAPM. Though, liquidity augmented four factor model was found to be slightly better in explaining Indian stock returns as compared to Fama and French three factor model.
Book Synopsis Mimicking Portfolios, Economic Risk Premia, and Tests of Multi-beta Models by :
Download or read book Mimicking Portfolios, Economic Risk Premia, and Tests of Multi-beta Models written by and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "This paper considers two alternative formulations of the linear factor model (LFM) with nontraded factors. The first formulation is the traditional LFM, where the estimation of risk premia and alphas is performed by means of a cross-sectional regression of average returns on betas. The second formulation (LFM*) replaces the factors with their projections on the span of excess returns. This formulation requires only time-series regressions for the estimation of risk premia and alphas. We compare the theoretical properties of the two approaches and study the small-sample properties of estimates and test statistics. Our results show that when estimating risk premia and testing multi-beta models, the LFM* formulation should be considered in addition to, or even instead of, the more traditional LFM formulation"--Federal Reserve Bank of Atlanta web site.
Book Synopsis Mimicking Portfolios with Conditioning Information by : Wayne E. Ferson
Download or read book Mimicking Portfolios with Conditioning Information written by Wayne E. Ferson and published by . This book was released on 2005 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Mimicking portfolios have long been useful in asset pricing research. In most empirical applications, the portfolio weights are assumed to be fixed over time, while in theory they may be functions of the economic state. This paper derives and characterizes mimicking portfolios in the presence of predetermined state variables, or conditioning information. The results generalize and integrate multifactor minimum variance efficiency (Fama, 1996) with conditional and unconditional mean variance efficiency (Hansen and Richard (1987), Ferson and Siegel, 2001). Empirical examples illustrate the potential importance of time-varying mimicking portfolio weights and highlight challenges in their application"--National Bureau of Economic Research web site.
Book Synopsis Testing Multi-factor Asset Pricing Models in the Visegrad Countries by : Magdalena Morgese Borys
Download or read book Testing Multi-factor Asset Pricing Models in the Visegrad Countries written by Magdalena Morgese Borys and published by . This book was released on 2007 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Multifactor Asset Pricing Model Incorporating Coskewness and Cokurtosis by : Nathee Naktnasukanjn
Download or read book Multifactor Asset Pricing Model Incorporating Coskewness and Cokurtosis written by Nathee Naktnasukanjn and published by . This book was released on 2015 with total page 292 pages. Available in PDF, EPUB and Kindle. Book excerpt:
