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Disagreement And Asset Prices
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Book Synopsis Disagreement and Asset Prices by : Bruce Ian Carlin
Download or read book Disagreement and Asset Prices written by Bruce Ian Carlin and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: How do differences of opinion affect asset prices? Do investors earn a risk premium when disagreement arises in the market? Despite their fundamental importance, these questions are among the most controversial issues in finance. In this paper, we use a novel data set that allows us to directly measure the level of disagreement among Wall Street mortgage dealers about prepayment speeds. We examine how disagreement evolves over time and study its effects on expected returns, return volatility, and trading volume in the mortgage-backed security market. We find that increased disagreement is associated with higher expected returns, higher return volatility, and larger trading volume. These results imply that there is a positive risk premium for disagreement in asset prices. We also show that volatility in and of itself does not lead to higher trading volume. Rather, it is only when disagreement arises in the market that higher uncertainty is associated with more trading. Finally, we are able to distinguish empirically between two competing hypotheses regarding how information in markets gets incorporated into asset prices. We find that sophisticated investors appear to update their beliefs through a rational expectations mechanism when disagreement arises.
Book Synopsis Diversity, Disagreement, and Asset Prices by : 蘇昱翔
Download or read book Diversity, Disagreement, and Asset Prices written by 蘇昱翔 and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Disagreement, Tastes, and Asset Prices by : Eugene F. Fama
Download or read book Disagreement, Tastes, and Asset Prices written by Eugene F. Fama and published by . This book was released on 2008 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: Standard asset pricing models assume that (i) there is complete agreement among investors about probability distributions of future payoffs on assets, and (ii) investors choose asset holdings based solely on anticipated payoffs; that is, investment assets are not also consumption goods. Both assumptions are unrealistic. We provide a simple framework for studying how disagreement and tastes for assets as consumption goods can affect asset prices.
Book Synopsis Why Disagreement May Not Matter (much) for Asset Prices by : Paul Söderlind
Download or read book Why Disagreement May Not Matter (much) for Asset Prices written by Paul Söderlind and published by . This book was released on 2013 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: A simple consumption-based two-period model is used to study the (theoretical) effects of disagreement on asset prices. Analytical and numerical results show that individual uncertainty has a much larger effect on risk premia than disagreement if (i) the risk aversion is reasonably high and (ii) individual uncertainty is not much smaller than disagreement. Evidence from survey data on beliefs about output growth suggests that the latter is more than satisfied.
Book Synopsis Two Essays on Investor Disagreement and Asset Prices by : Sulei Han
Download or read book Two Essays on Investor Disagreement and Asset Prices written by Sulei Han and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In my second essay, I emphasize and examine the role of the consensus investor opinion in the relation between heterogeneous investor beliefs and stock prices, which is largely overlooked in the prior empirical literature. I measure investors' opinions based on financial analysts' stock recommendations and study how both investors' opinions and their disagreement jointly affect stock prices. I show that the consensus opinion is at least as important as the dispersion of opinion in predicting stock returns. When the consensus opinion is pessimistic, investor disagreement leads to lower stock returns, but the opposite is true when the consensus opinion is optimistic. Moreover, strong investor agreement predicts stock returns and largely drives the return difference between high- and low-agreement stocks. In supporting evidence, I show that both the investor opinion and its dispersion are related to short-sale constraints and strong optimistic agreement is significantly associated with binding short-sale constraints.
Book Synopsis Asset Prices, Disagreement, and Trade Volume by : Fabian Schuetze
Download or read book Asset Prices, Disagreement, and Trade Volume written by Fabian Schuetze and published by . This book was released on 2018 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this thesis, I discuss how asset prices are influenced by the decisions of heterogeneous investors. Asset prices are conventionally explained through a representativeinvestor whose risk-aversion fluctuates or who faces fluctuating fundamental uncertainty. Much progress has been made in describing how such an investor influences prices. Yet, such work poses considerable difficulties. In particular, empirical studies document that trade volume predicts asset prices and investors infer information from prices. Furthermore, the burgeoning household finance literature documents patterns in portfolio allocations across investors. While models with heterogeneous investors can address such shortcomings, more work is needed to understand them. In particular, little is known about how differentially informed investors learn in financial markets and how their opinions affect prices. I describe how disagreement affects volatility in my chapter one of my thesis. I also examine how asymmetrically informed investors learn from prices in chapter two. Finally, Joao Brogueira and I made a theoretical contribution in our published paper which is contained in chapter 3 of my thesis.
Book Synopsis Model Disagreement and Economic Outlook by : Daniel Andrei
Download or read book Model Disagreement and Economic Outlook written by Daniel Andrei and published by . This book was released on 2014 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the impact of model disagreement on the dynamics of asset prices, return volatility, and trade in the market. In our continuous-time framework, two investors have homogeneous preferences and equal access to information, but disagree about the length of the business cycle. We show that model disagreement amplifies return volatility and trading volume by inducing agents to have different economic outlooks, which generates a term structure of disagreement. Different economic outlooks imply that investors will trade even if they do not disagree about the current value of fundamentals. Also, we find that while the absolute level of return volatility is driven by long-run risk, the variation and persistence of volatility (i.e., volatility clustering) is driven by disagreement. Compared to previous studies that consider model uncertainty with a representative agent or those that study heterogeneous beliefs with no model disagreement, our paper offers a theoretical foundation for the GARCH-like behavior of stock returns.
Book Synopsis Disagreement, Habit and the Dynamic Relation Between Volume and Prices by : Costas Xiouros
Download or read book Disagreement, Habit and the Dynamic Relation Between Volume and Prices written by Costas Xiouros and published by . This book was released on 2016 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dynamic asset pricing models typically do not generate trading volume whereas empirically trading volume is strongly related to asset prices; volume is usually high when returns are high and during periods of high return volatility. Stock prices on the other hand are known to be quite volatile and require a high equity premium while the risk-free rate of return is low and quite stable. We attempt to reconcile all these price and volume characteristics in a new model of disagreement where agents have external habit formation preferences that generate time-variation in risk-aversion. The model is flexible enough to be able to generate in a number of ways the dynamic relation between prices and volume whereas it also provides a configuration by which prices are also fitted well. The paper additionally shows that the information structure and the asset structure have important implications for the correlation between stock returns and volume.
Book Synopsis Trust Based Origins of Disagreement in Financial Markets by : Anmol Sethy
Download or read book Trust Based Origins of Disagreement in Financial Markets written by Anmol Sethy and published by . This book was released on 2019 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Disagreement affects asset prices and several asset specific sources of disagreement have been identified. Still relatively little is known about the potential exogenous sources. This article presents evidence that one such exogenous source is societal trust. Trust leads to two kinds of behavior - reliance on others and disclosure to others. These two behaviors can impact disagreement in diverse ways. We show that higher trust increases reliance, which leads to lower earnings disagreement. On the contrary, higher trust also increases disclosure which leads to higher target price disagreement. Additionally, trust enhances risk taking which is also positively associated with target price disagreement. In addition, the context in trust also matters. Trust in corporates reduces both forms of disagreement. Trust in the press, however, decreases disagreement in earnings estimates while increasing disagreement in target price. Hence, trust effects disagreement in a highly nuanced manner depending on the form of disagreement and context of trust.
Book Synopsis Differences of Opinion and the Price Volume Relation by : Costas Xiouros
Download or read book Differences of Opinion and the Price Volume Relation written by Costas Xiouros and published by . This book was released on 2010 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper solves a dynamic general equilibrium asset pricing model of disagreement that draws a direct link between asset prices and the financial volume of trade. The model exhibits two risk averse agents that hold heterogeneous beliefs about the conditional mean of the aggregate consumption growth. The differences in opinions is supported by the fact that agents interpret public information differently. The connecting link between prices and volume is an exogenously time varying disagreement intensity that determines the magnitude of disagreement about new information. The model is able to explain a number of seemingly unrelated asset pricing facts namely the positive correlation between price changes and volume, the contemporaneous relation between volume and return volatility, the excess volatility, the volatility persistence and the negative correlation between price levels and volatility.
Book Synopsis Disagreement Among FOMC Members and Asset Prices by : Shintaro Suda
Download or read book Disagreement Among FOMC Members and Asset Prices written by Shintaro Suda and published by . This book was released on 2018 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years, central banks have focused on communication with financial markets, and have tended to conduct policy with high transparency in order to further enhance the effectiveness of monetary policy. In this research, we focus on the members of the U.S. Federal Open Market Committee (FOMC) which determines monetary policy and try to analyze how their disagreement affect investors' behavior based on the announcements of macroeconomic indicators. In order to quantify disagreement among FOMC members, we collect text data on speeches by FOMC members and quantify them by applying text mining techniques. We then define disagreement among FOMC members through the dispersion of the quantified sentiments. Swanson and Williams (2014) show that investor response to the surprising announcements of macroeconomic indicators weakens under the zero interest rate constraint. In this research, consistent with Detmers (2016), we indicate that (1) investors' response to surprising announcements of macroeconomic indicators weakens under forward guidance, (2) when disagreement among FOMC members is high, investors again react strongly to the announcements, and (3) investors are more aware of disagreement among members with voting rights than members who do not have at the FOMC meeting. Thus, disagreement, especially among members with voting rights, appears to lower the effectiveness of forward guidance to weaken the Fed's commitment as perceived by investors, and to lead investors to be sensitive to the announcements of macroeconomic indicators.
Book Synopsis Testing Disagreement Models by : Yen-cheng Chang
Download or read book Testing Disagreement Models written by Yen-cheng Chang and published by . This book was released on 2020 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide plausibly identified evidence for the role of investor disagreement in asset pricing. Our natural experiment exploits the staggered implementation of EDGAR, which induces a reduction in investor disagreement with no accompanying changes in company fundamentals, disclosure quality, or earnings management. The reduction in disagreement leads to lower stock price crash risk. The effect is more pronounced for stocks with binding short-sale constraints and high investor optimism. The reduction in disagreement also leads to higher subsequent returns. Our results provide evidence consistent with models of investor disagreement.
Book Synopsis Investors and Markets by : William F. Sharpe
Download or read book Investors and Markets written by William F. Sharpe and published by Princeton University Press. This book was released on 2011-01-01 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Investors and Markets, Nobel Prize-winning financial economist William Sharpe shows that investment professionals cannot make good portfolio choices unless they understand the determinants of asset prices. But until now asset-price analysis has largely been inaccessible to everyone except PhDs in financial economics. In this book, Sharpe changes that by setting out his state-of-the-art approach to asset pricing in a nonmathematical form that will be comprehensible to a broad range of investment professionals, including investment advisors, money managers, and financial analysts. Bridging the gap between the best financial theory and investment practice, Investors and Markets will help investment professionals make better portfolio choices by being smarter about asset prices. Based on Sharpe's Princeton Lectures in Finance, Investors and Markets presents a method of analyzing asset prices that accounts for the real behavior of investors. Sharpe makes this technique accessible through a new, one-of-a-kind computer program (available for free on his Web site, at http://www.stanford.edu/~wfsharpe/apsim/index.html) that enables users to create virtual markets, setting the starting conditions and then allowing trading until equilibrium is reached and trading stops. Program users can then analyze the final portfolios and asset prices, see expected returns, and measure risk. In addition to popularizing the most sophisticated form of asset-price analysis, Investors and Markets summarizes much of Sharpe's most important previous work and reflects a lifetime of thinking about investing by one of the leading minds in financial economics. Any serious investment professional will benefit from Sharpe's unique insights.
Book Synopsis Disagreement and the Superior Performance of Value Stocks by : John A. Doukas
Download or read book Disagreement and the Superior Performance of Value Stocks written by John A. Doukas and published by . This book was released on 2004 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate whether divergence of opinion among investors, manifested in the dispersion of analysts' earnings forecasts, plays an important role in asset pricing. Specifically, we test whether disagreement can explain the cross-sectional return difference between value and growth stocks over the 1983-2001 period. Consistent with the theoretical proposition of Williams (1977), that stocks subject to greater investor disagreement earn higher returns, we find value stocks to be exposed to greater investor disagreement than glamour stocks. Our findings suggest that the return advantage of value strategies is a reward for the greater disagreement characterizing their future growth in earnings. Alternative multifactor asset pricing tests show that investor disagreement plays an important role in explaining the superior return of value stocks.
Book Synopsis Mortgage-Backed Securities by : Frank J. Fabozzi
Download or read book Mortgage-Backed Securities written by Frank J. Fabozzi and published by John Wiley & Sons. This book was released on 2010-12-30 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt: An in-depth look at the latest innovations in mortgage-backed securities The largest sector of the fixed-income market is the mortgage market. Understanding this market is critical for portfolio managers, as well as issuers who must be familiar with how these securities are structured. Mortgage-Backed Securities is a timely guide to the investment characteristics, creation, and analysis of residential real estate-backed securities. Each chapter contains cutting-edge information for investors, traders, and other professionals involved in this market, including discussions of structuring mortgage products-such as agency CMOs and new types of mortgages-and an in-depth explanation of the concept of option-adjusted spreads and other analytical concepts used to assess relative value.
Book Synopsis Empirical Asset Pricing by : Wayne Ferson
Download or read book Empirical Asset Pricing written by Wayne Ferson and published by MIT Press. This book was released on 2019-03-12 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.
Book Synopsis Salomon Smith Barney Guide to Mortgage-Backed and Asset-Backed Securities by : Lakhbir Hayre
Download or read book Salomon Smith Barney Guide to Mortgage-Backed and Asset-Backed Securities written by Lakhbir Hayre and published by John Wiley & Sons. This book was released on 2001-05-07 with total page 896 pages. Available in PDF, EPUB and Kindle. Book excerpt: Der Markt für hypothekarisch gedeckte und forderungsbesicherte Wertpapiere ist seit 1980 von etwa 1 Milliarde US Dollar auf über 2,5 Billionen US Dollar angestiegen. Der "Salomon Smith Barney Guide to Mortgaged-Backed and Asset-Backed Securities" trägt dieser Entwicklung Rechnung. Autor Lakhbir Hayre, Mitarbeiter von Salomon Smith Barney, New York, erläutert dieses Thema anhand von unternehmeninternem Material anschaulich, zusammenhängend, praxisnah und umfassend. Dieses Buch ist nicht nur ein nützlicher Leitfaden für die Praxis, sondern auch ein ideales Übungsbuch und Nachschlagewerk für alle Investmentprofis, institutionelle Anleger und Anleger in Pensionsfonds und Hedge Funds.
