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Aggregate Volatility Risk And The Cross Section Of Stock Returns
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Book Synopsis Aggregate Volatility Risk and the Cross-Section of Stock Returns by : Van Anh (Vivian) Mai
Download or read book Aggregate Volatility Risk and the Cross-Section of Stock Returns written by Van Anh (Vivian) Mai and published by . This book was released on 2015 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the relation between aggregate volatility risk and the cross-section of stock returns in Australia. We use a stock's sensitivity to innovations in the ASX200 implied volatility (VIX) as a proxy for aggregate volatility risk. Consistent with theoretical predictions, aggregate volatility risk is negatively related to the cross-section of stock returns only when market volatility is rising. The asymmetric volatility effect is persistent throughout the sample period and is robust after controlling for size, book-to-market, momentum, and liquidity issues. There is some evidence that aggregate volatility risk is a priced factor, especially in months with increasing market volatility.
Book Synopsis Aggregate Jump and Volatility Risk in the Cross-Section of Stock Returns by : Martijn Cremers
Download or read book Aggregate Jump and Volatility Risk in the Cross-Section of Stock Returns written by Martijn Cremers and published by . This book was released on 2014 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the pricing of both aggregate jump and volatility risk in the cross-section of stock returns by constructing investable option trading strategies that load on one factor but are orthogonal to the other. Both aggregate jump and volatility risk help explain variation in expected returns. Consistent with theory, stocks with high sensitivities to jump and volatility risk have low expected returns. Both can be measured separately and are important economically, with a two-standard deviation increase in jump (volatility) factor loadings associated with a 3.5 to 5.1 (2.7 to 2.9) percent drop in expected annual stock returns.
Book Synopsis The Cross-section of Volatility and Expected Returns by : Andrew Ang
Download or read book The Cross-section of Volatility and Expected Returns written by Andrew Ang and published by . This book was released on 2004 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: "We examine the pricing of aggregate volatility risk in the cross-section of stock returns. Consistent with theory, we find that stocks with high sensitivities to innovations in aggregate volatility have low average returns. In addition, we find that stocks with high idiosyncratic volatility relative to the Fama and French (1993) model have abysmally low average returns. This phenomenon cannot be explained by exposure to aggregate volatility risk. Size, book-to-market, momentum, and liquidity effects cannot account for either the low average returns earned by stocks with high exposure to systematic volatility risk or for the low average returns of stocks with high idiosyncratic volatility"--National Bureau of Economic Research web site.
Book Synopsis Idiosyncratic Volatility, Aggregate Volatility Risk, and the Cross-section of Returns by : Alexander Barinov
Download or read book Idiosyncratic Volatility, Aggregate Volatility Risk, and the Cross-section of Returns written by Alexander Barinov and published by . This book was released on 2008 with total page 290 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Tradable Aggregate Risk Factors and the Cross-Section of Stock Returns by : Nikolay Doskov
Download or read book Tradable Aggregate Risk Factors and the Cross-Section of Stock Returns written by Nikolay Doskov and published by . This book was released on 2016 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a new set of tradable aggregate risk factors that help us understand the cross-section of stock returns. We argue that the true stochastic discount factor is a combination of aggregate return factors that drive equity market returns. Hence, we consider new factors using data such as market dividend swaps and market volatility futures. In the particular case of value and size portfolios, we find that differences in expected returns can be explained by a single-factor projection of the discount factor that loads only on a dividend growth return factor constructed with market dividend swap data. Hence, value and small capitalization stocks have higher expected returns due to their exposure to dividend growth returns implying that growth risks (dividend growth news and/or expected return news associated with dividend growth) are the only source of their risk premia. A tradable dividend level factor and a volatility-based factor are also priced in the cross-section of other stock portfolios sorted on dividend yield, earnings yield and cash-flow-to-price.
Book Synopsis Irrational Exuberance Reconsidered by : Mathias Külpmann
Download or read book Irrational Exuberance Reconsidered written by Mathias Külpmann and published by Springer Science & Business Media. This book was released on 2004-01-20 with total page 268 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mathias Külpmann presents a framework to evaluate whether the stock market is in line with underlying fundamentals. The new and revised edition offers an up to date introduction to the controversy between rational asset pricing and behavioural finance. Empirical evidence of stock market overreaction are investigated within the paradigms of rational asset pricing and behavioural finance. Although this monograph will not promise the reader to become a millionaire, it offers a road to obtain a deeper understanding of the forces which drive stock returns. It should be of interest to anyone interested in what drives performance in the stock market.
Book Synopsis Volatility Risk and Stock Return Predictability by : Cesario Mateus
Download or read book Volatility Risk and Stock Return Predictability written by Cesario Mateus and published by . This book was released on 2014 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the role of volatility risk on stock return predictability. Using 596 stock options traded at the American Stock Exchange and the Chicago Board Options Exchange (CBOE) for the period from January 2001 to December 2010 we examine the relation between different idiosyncratic volatility measures and expected stock returns for a period that involves both the dotcom bubble and the recent financial crisis. We first show that implied idiosyncratic volatility is the best stock return predictor among the different volatility measures used. Second, cross-section firm-specific characteristics are important on stock returns forecast. Third, we provide evidence that higher short selling constraints impact negatively stock returns having liquidity the opposite effect.
Book Synopsis Aggregate Volatility Risk and Momentum Returns by : Efdal Ulas Misirli
Download or read book Aggregate Volatility Risk and Momentum Returns written by Efdal Ulas Misirli and published by . This book was released on 2012 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Momentum profits are generated by winners' exposure to aggregate volatility risk. A proxy for aggregate volatility shock (AVS) which comes from an EGARCH (1,1) model of monthly market excess returns is a priced risk factor in cross-sectional regressions and commands a negative risk premium. Winners have negative AVS loadings thereby earning higher average returns than do losers. Event time analyses reveal important insights about the temporary nature of momentum profits. For example, I find that winners have lower AVS loadings than do losers over the first 6 months of the holding period and that the difference in loadings becomes mostly insignicant thereafter. Another event-time study shows that the profitability of momentum strategies after up-market states can also be attributed to the difference in aggregate volatility risk. I explain the negative AVS loadings of winners with a real option argument. Over the evaluation period winner firms develop growth options and their market values become sensitive to aggregate demand conditions. AVS is a negative demand shock that causes investment cuts and downward revisions in future earnings. The decline in investment growth and thereby the loss in market value is more pronounced for winners. Moreover, the reversal of momentum returns one year after portfolio formation is partly explained by the negative cross-sectional relation between real investment and average returns. Additional robustness checks and comparison with conditional CAPM suggest that the ICAPM with aggregate volatility risk is an important multifactor model that accounts for the cross-sectional return variation of momentum stocks"--Page v.
Book Synopsis The Cross-Section of Stock Return and Volatility by :
Download or read book The Cross-Section of Stock Return and Volatility written by and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: There has been increasing research on the cross-sectional relation between stock return and volatility. Conclusions are, however, mixed, partially because volatility or variance is modeled or parameterized in various ways. This paper, by using the Jiang and Tian (2005)'s model-free method, estimates daily option implied volatility for all US individual stocks from 1996:01 to 2006:04, and then employs this information to extract monthly volatilities and their idiosyncratic parts for cross-sectional regression analyses. We follow the Fama and French (1992) cross-sectional regression procedure and show that each of the 4 monthly measures of change of total volatility, total volatility, expected idiosyncratic variance, and expected idiosyncratic volatility is a negative priced factor in the cross-sectional variation of stock returns. We also show that the negative correlation between return and total volatility or expected idiosyncratic variance or expected idiosyncratic volatility strengthens as leverage increases or credit rating worsens. However, leverage does not play a role in the relation between return and change of total volatility. Finally, responding to recent papers, we show that the investor sentiment does not have a significant impact on the cross- sectional relation between return and volatility.
Book Synopsis Volatility Risk Premium, Risk Aversion and the Cross-Section of Stock Returns by : Peter M. Nyberg
Download or read book Volatility Risk Premium, Risk Aversion and the Cross-Section of Stock Returns written by Peter M. Nyberg and published by . This book was released on 2008 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test if innovations in investor risk aversion are a priced factor in the stock market as is predicted by models incorporating habit formation in preferences. Our proxy for time-varying risk aversion is based on the volatility risk premium series constructed by Bollerslev et al. (2007). Time-series tests show that a mimicking portfolio tracking innovations in risk aversion partly captures the strong momentum effect in stock returns and produces only two significant alphas for 25 momentum portfolios. Furthermore, using 25 portfolios sorted on book-to-market and size as test assets in Fama-MacBeth regressions, our new factor together with the market factor explains 64% of the variation in average returns compared to 60% for the Fama-French three factor model. The new factor is generally significant with an estimated risk premium close to its time series mean also when industry portfolios and portfolios sorted on previous returns are included among the test assets.
Book Synopsis Aggregate Volatility Risk by : Stanley Peterburgsky
Download or read book Aggregate Volatility Risk written by Stanley Peterburgsky and published by . This book was released on 2018 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a procedure analogous to that of Ang et al. (2006), this paper documents that aggregate volatility risk does not appear to be priced in European equity markets. Specifically, based on the 2002-2016 period (for which European stock return data is available), the price of aggregate volatility risk is not statistically different from zero. Analysis based on GARCH-class and high-frequency intraday data models support these results. Consequently, contrary to what has been reported in some studies that examine U.S. data, whether aggregate volatility risk is priced in equity markets is an open question.
Book Synopsis Time-Varying Liquidity Risk and the Cross Section of Stock Returns by : Akiko Watanabe
Download or read book Time-Varying Liquidity Risk and the Cross Section of Stock Returns written by Akiko Watanabe and published by . This book was released on 2013 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies whether stock returns' sensitivities to aggregate liquidity fluctuations and the pricing of liquidity risk vary over time. We find that liquidity betas vary across two distinct states: one with high liquidity betas and the other with low betas. The high liquidity-beta state is short lived and characterized by heavy trade, high volatility, and a wide cross-sectional dispersion in liquidity betas. It also delivers a disproportionately large liquidity risk premium, amounting to more than twice the value premium. Our results are consistent with a model of liquidity risk in which investors face uncertainty about their trading counterparties' preferences.
Book Synopsis Volatility Risk and Stock Return Predictability on Global Financial Crises by : Worawuth Kongsilp
Download or read book Volatility Risk and Stock Return Predictability on Global Financial Crises written by Worawuth Kongsilp and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Model-free Measure of Aggregate Idiosyncratic Volatility and the Prediction of Market Returns by :
Download or read book A Model-free Measure of Aggregate Idiosyncratic Volatility and the Prediction of Market Returns written by and published by . This book was released on 2013 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Cross Sectional Variation of Stock Returns and Return Volatility by : Xiaotong Wang
Download or read book Cross Sectional Variation of Stock Returns and Return Volatility written by Xiaotong Wang and published by . This book was released on 2006 with total page 268 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Aggregate Volatility Risk and Momentum Returns by : Efdal Misirli
Download or read book Aggregate Volatility Risk and Momentum Returns written by Efdal Misirli and published by . This book was released on 2018 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: Momentum stocks are exposed to aggregate volatility risk. This paper estimates an EGARCH model of market volatility to introduce a new volatility risk factor that prices itself, and thereby becomes a candidate risk factor for analyzing stock market anomalies such as momentum. Winners have negative loadings on this new volatility factor, whereas losers have positive loadings. Since volatility risk carries a negative price of risk, the new factor helps explain 81% of momentum profits. The paper also rationalizes the volatility risk exposures of momentum portfolios and the short life of profits using event studies and growth option arguments.
Book Synopsis The Information Content in Implied Idiosyncratic Volatility and the Cross-Section of Stock Returns by : Dean Diavatopoulos
Download or read book The Information Content in Implied Idiosyncratic Volatility and the Cross-Section of Stock Returns written by Dean Diavatopoulos and published by . This book was released on 2014 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Current literature is inconclusive as to whether idiosyncratic risk influences future stock returns and the direction of the impact. Prior studies are based on historical realized volatility. Implied volatilities from option prices represent the market's assessment of future risk and are likely a superior measure to historical realized volatility. We use implied idiosyncratic volatilities on firms with traded options to examine the relation between idiosyncratic volatility and future returns. We find a strong positive link between implied idiosyncratic risk and future returns. After considering the impact of implied idiosyncratic volatility, historical realized idiosyncratic volatility is unimportant. This performance is strongly tied to small size and high book-to-market equity firms.
