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Author : Bradley Steele Paye
Publisher :
ISBN 13 :
Total Pages : 380 pages
Book Rating : 4.:/5 (318 download)
Download or read book Essays on Stock Return Predictability and Portfolio Allocation written by Bradley Steele Paye and published by . This book was released on 2004 with total page 380 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Hui-Ju Tsai
Publisher :
ISBN 13 :
Total Pages : 116 pages
Book Rating : 4.:/5 (693 download)
Download or read book Essays on Optimal Portfolio Decisions for Long-term Investors written by Hui-Ju Tsai and published by . This book was released on 2010 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation contains two essays on the optimal portfolio decision for long-term investors. The first essay studies the optimal asset allocation for long-horizon investors with non-tradable labor income when multiple risky asset returns are predictable. It finds that more risk-averse investors hold a higher bond/stock ratio in their risky portfolios when labor income is positively correlated with stock return or independent of risky asset returns, but the reverse is true when labor income is positively correlated with bond return. The allocation to stock inherits the inverted U-shaped pattern of labor income growth with respect to expected time until retirement. These results suggest that popular recommendations of investment advisors that more conservative investors should hold a higher bond/stock ratio and that the portfolio allocation to stock should equal 100 minus age may both lack theoretical justification. In the out-of-sample performance test, the dynamic portfolio shows the highest mean returns and Sharpe ratio than two benchmark portfolios, justifying the economic significance of incorporating the time-variation of investment opportunities and nontradable labor income into investors' portfolio choice. The second essay studies employees' optimal portfolio in their defined contribution pension plans. Assuming a discrete time model with predictable risky asset returns, the essay finds that the employees' optimal portfolio decision can be greatly affected by the employees' time to retirement, risk preference, contribution rate as well as the correlation between labor income and asset returns. Performance test shows that the gains from adopting the dynamic portfolio strategy relative to several benchmark strategies, including the 1/n rule, the optimal static strategy with and without the consideration of asset return predictability, all stock strategy, and all company stock strategy, are economically significant and the economic gain increases with employees' risk aversion. The empirical evidence that employees invest significantly in their company stock in pension plans is difficult to be justified, even after the consideration of short-sale constraints, higher expected company stock return, employees' familiarity with their company, and employers' exclusive match policy. Over allocation to company stock can be very costly, especially to conservative employees.
Author : Amit Goyal
Publisher :
ISBN 13 :
Total Pages : 374 pages
Book Rating : 4.:/5 ( download)
Download or read book Three Essays on the Predictability of Stock Returns written by Amit Goyal and published by . This book was released on 2001 with total page 374 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Qing Bai
Publisher :
ISBN 13 :
Total Pages : 96 pages
Book Rating : 4.:/5 (94 download)
Download or read book Essays on Stock Return Predictability written by Qing Bai and published by . This book was released on 2014 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt: The dissertation consists of two essays. Essay I examines the return predictability by firm level R & D and innovation measures and shows that technology spillover helps to explain the positive innovation-return relation. Essay II propose a novel measure of conditional value premium based on firm's stock split announcement. This measure is shown to have a strong predicting power over value premium both in sample and out of sample. Essay I: I show that technology spillovers are important information phenomena that benefit both other innovators (as emphasized in the Industrial Organization literature) and stock market investors. I find that the premium associated with R & D and patenting activities is largely restricted to firms located in more isolated technology spaces with fewer spillovers. Moreover, there is a strong lead-lag effect among firms engaging in innovative activities: the stock prices of firms in more isolated technology spaces react more slowly to new information than do the stock prices of firms in more competitive technology spaces. Finally, announcement-day returns to patent grants are greater for more technologically important patents (measured by forward citations), but only for firms in more crowded technology spaces. My results indicate that investors are able to value innovative investments by exploiting the information flows associated with greater technology spillovers. Essay II: I propose a novel conditional value premium measure based on the present-value relation that the stock price impact of a firm's public announcement reveals the firm's expected discount rates. Specifically, because most splitting stocks are growth stocks on which, by construction, the value premium has strong influence, the average splitting stock announcement-day returns track closely conditional value premium. I find very similar results using announcements of divested asset acquisitions in which acquirers are usually growth firms. Consistent with risk-based explanations, my conditional value premium measure correlates positively with future GDP growth and helps explain the cross-section of stock returns.
Author : William N. Goetzmann
Publisher : Oxford University Press
ISBN 13 : 0195148142
Total Pages : 568 pages
Book Rating : 4.1/5 (951 download)
Download or read book The Equity Risk Premium written by William N. Goetzmann and published by Oxford University Press. This book was released on 2006-11-16 with total page 568 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book aims to create a strong understanding of the empirical basis for the equity risk premium. Through the research and anaylsis of two scholars who are experts in this field, this volume presents the key issues that are paramount to investors, including whether or not to use historical data as a method of equity investing, and can the equity premium reflect changes in fundamental values and cash flows of the market.
Author : Ekaterina Serikova
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (114 download)
Download or read book Essays on Market Microstructure and Return Predictability of Mutual Funds written by Ekaterina Serikova and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contains three papers. Each paper addresses a distinct research question and is implemented on a separate dataset. The first paper concludes that daytime auctions, together with market opening and closing intervals, contribute to the periodicity of the cross-section of stock returns. By applying the model of infrequent rebalancing, I show that model parameters fit the data for the after-auction intervals. I thus conclude that after-auction periods take over a large share of infrequent rebalancing and show that this effect is driven by the concentration of liquidity traders. Small, low-fragmented stocks heavily traded on the home market show the strongest evidence for infrequent rebalancing after the daytime auctions. The second paper sheds light on how traders allocate risk of stock portfolios in a trading day. Traders decrease risk before the market close. They do so by selling stocks with the highest marginal risk and buying stocks that decrease the risk of their portfolio the most. As our measure of portfolio risk relates to the one that clearing houses use for the margin requirements, we conclude that the risk-reduction behavior is driven by traders' reluctance to provide end-of-day margin contributions to the CCP. These trading flows in the direction of risk contraction distort closing stock prices. The third paper replicates and combines eight prominent predictors of mutual fund returns to obtain a composite, aggregate fund predictor. While only three of the eight individual variables are significant predictors of future fund performance in a multivariate setting, the composite predictor has strong forecasting power. A hypothetical quintilebased long-short strategy based on the composite predictor realizes a four-factor alpha of 6% per year. The performance spread is robust to different regression specifications, is similar for different size classes and investment styles, and persists over time. Our results p.
Author : Yuzhao Zhang
Publisher :
ISBN 13 :
Total Pages : 316 pages
Book Rating : 4.:/5 ( download)
Download or read book Essays on Return Predictability and Volatility Estimation written by Yuzhao Zhang and published by . This book was released on 2008 with total page 316 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Shu Yan
Publisher :
ISBN 13 :
Total Pages : 310 pages
Book Rating : 4.:/5 ( download)
Download or read book Three Essays on Stock Market Volatility and Stock Return Predictability written by Shu Yan and published by . This book was released on 2000 with total page 310 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Arthur Ritter
Publisher : GRIN Verlag
ISBN 13 : 3656968926
Total Pages : 21 pages
Book Rating : 4.6/5 (569 download)
Download or read book Stock Return Predictability written by Arthur Ritter and published by GRIN Verlag. This book was released on 2015-05-27 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research Paper (postgraduate) from the year 2015 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 17 (1,3), University of St Andrews (School of Management), course: Investment and Portfolio Management, language: English, abstract: Empirical evidence of stock return predictability obtained by financial ratios or macroeconomic factors has received substantial attention and remains a controversial topic to date. This is no surprise given that the existence of return predictability is not only of interest to practitioners but also introduces severe implications for financial models of risk and return. Founded on the assumption of efficient capital markets, research on capital asset pricing models has instigated this emergence of stock return predictability factors. Analysing these factors categorically, this paper will provide a balanced discussion of advocates as well as sceptics of stock return predictability. This essay will commence by firstly outlining the fundamental assumptions of an efficient capital market and its implications for return predictability. Subsequently, a thorough focus will be placed on the most significant predictability factors, including fundamental financial ratios and macroeconomic indicators as well as the validity of sampling methods used to attain return forecasts. Lastly this essay will reflect on the findings while proposing areas of further research.
Author : Lei Jiang
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (14 download)
Download or read book Essays on Stock Return Predictability and Market Efficiency written by Lei Jiang and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Huacheng Zhang
Publisher :
ISBN 13 :
Total Pages : 282 pages
Book Rating : 4.:/5 (852 download)
Download or read book Essays in Asset Allocation written by Huacheng Zhang and published by . This book was released on 2013 with total page 282 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two essays in asset allocation. In the first essay, I measure the value of active money management. I explore this issue by comprehensively examining the parametric rule proposed by Brandt, Santa-Clara and Valkanov (2009) (the BSV rule) out-of-sample for portfolio selection among 3516 stocks in CRSP and comparing this rule to the mean-variance (MV) rule and the naïve 1/N rule recently advocated by DeMiguel, Garlappi and Uppal (2009). The BSV rule outperforms both the MV and 1/N rules and the outperformance is robust to investment horizons and stock market states. The BSV rule is effective for investors with different preferences or investment opportunities. The effectiveness of the BSV rule is robust to data screening criteria, estimation periods, portfolio performance evaluation models, the business cycle, and stock market states. In the second essay, I explore the question of whether macroeconomic state variables are able to predict cross-sectional stock returns from the perspective of asset allocation. I find that conditioning on macroeconomic state variables leads to optimal portfolios with a Carhart alpha that is 125 basis points per month higher than unconditional optimal portfolios out-of-sample. Unfortunately, conditioning on macroeconomic states is subject to an "overfitting" problem and can lead investors to experience unexpected huge losses. My results suggest that macroeconomic state variables mare able to predict cross-sectional stock returns but risk-averse investors need to combine other funds (e.g. market portfolio) to take advantage of this predictability.
Author : Shmuel Kandel
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (318 download)
Download or read book On the Predictability of Stock Returns written by Shmuel Kandel and published by . This book was released on 1995 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: The predictability of monthly stock returns is investigated from the perspective of a risk-averse investor who uses the data to update initially vague beliefs about the conditional distribution of returns. The optimal stocks-versus-cash allocation of the investor can depend importantly on the current value of a predictive variable, such as dividend yield, even though a null hypothesis of no predictability might not be rejected at conventional significance levels. When viewed in this economic context, the empirical evidence indicates a strong degree of predictability in monthly stock returns.
Author : Yihong Xia
Publisher :
ISBN 13 :
Total Pages : 418 pages
Book Rating : 4.:/5 ( download)
Download or read book Three Essays on the Effect of Learning and Predictability on Optimal Dynamic Portfolio Strategies and Asset Prices written by Yihong Xia and published by . This book was released on 2000 with total page 418 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Ruojun Wu
Publisher :
ISBN 13 :
Total Pages : 137 pages
Book Rating : 4.:/5 (276 download)
Download or read book Essays on the Predictability and Volatility of Returns in the Stock Market written by Ruojun Wu and published by . This book was released on 2008 with total page 137 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies the effect of parameter uncertainty on the return predictability and volatility of the stock market. The first two chapters focus on the decomposition of market volatility, and the third chapter studies the return predictability. When facing imperfect information, the investors tend to form a learning scheme that encompasses both historical data and prior beliefs. In the variance decomposition framework, the introducing of learning directly impacts the way that return forecasts are revised and consequently the relative component of market volatility based on these forecasts, namely the price movements from revision on future discount rates and those from future cash flows. According to the empirical study in Chapter 1, the former is not necessarily the major driving force of market volatility, which provides an alternative view on what moves stock prices. Learning is modeled and estimated by Bayesian method. Chapter 2 follows the topic in Chapter 1 and studies the role of persistent state variables in return decomposition in order to provide more robust inference on variance decomposition. In Chapter 3 we propose to utilize theoretical constraints to help predict market returns when in sample data is very noisy and creates model uncertainty for the investors. The constraints are also incorporated by Bayesian method. We show in the out-of-sample forecast experiment that models with theoretical constraints produce better forecasts.
Author : Paul Dou
Publisher :
ISBN 13 :
Total Pages : 270 pages
Book Rating : 4.:/5 (874 download)
Download or read book Dynamic Asset Allocation, Equity Return Predictability and Market Anomalies written by Paul Dou and published by . This book was released on 2013 with total page 270 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Anselm Rogowski
Publisher :
ISBN 13 : 9783656968931
Total Pages : 20 pages
Book Rating : 4.9/5 (689 download)
Download or read book Stock Return Predictability written by Anselm Rogowski and published by . This book was released on 2015-06-03 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research Paper from the year 2015 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 17 (1,3), University of St Andrews (School of Management), course: Investment and Portfolio Management, language: English, abstract: Empirical evidence of stock return predictability obtained by financial ratios or macroeconomic factors has received substantial attention and remains a controversial topic to date. This is no surprise given that the existence of return predictability is not only of interest to practitioners but also introduces severe implications for financial models of risk and return. Founded on the assumption of efficient capital markets, research on capital asset pricing models has instigated this emergence of stock return predictability factors. Analysing these factors categorically, this paper will provide a balanced discussion of advocates as well as sceptics of stock return predictability. This essay will commence by firstly outlining the fundamental assumptions of an efficient capital market and its implications for return predictability. Subsequently, a thorough focus will be placed on the most significant predictability factors, including fundamental financial ratios and macroeconomic indicators as well as the validity of sampling methods used to attain return forecasts. Lastly this essay will reflect on the findings while proposing areas of further research.
Author : Shunlin Liang
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (18 download)
Download or read book Essays on Disaster Risk and Equity Return Predictability written by Shunlin Liang and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two essays on disaster risk and equity return predictability. The first essay proposes new measures of firm-level and market level disaster risk from deviation of put-call symmetry, which is free from being contaminated by the asymmetry between option traders and equity investors. Compared with other known measures of disaster risk, the market-level disaster risk measure robustly predicts aggregate market returns, with out-of-sample (R^2=6.86%) for the next twelve months. The cross-sectional analysis shows that firm-level disaster risk also explains variations in expected stock returns. Stocks with high firm-level disaster risk earn an annual four-factor subsequent alpha 8.0% higher than stocks with low firm-level disaster risk. I explore potential mechanisms giving rise to these asset pricing facts. The second essay finds that the investor’s learning of higher moments can account for the time-variation, size, and volatility of equity premium. I estimate the investor’s belief on skewness and kurtosis of consumption and dividend growth, and assume investor’s Bayesian learning about a skew student’s t-distribution with unknown fixed parameters. The predictive regressions show that more negative skewness and higher kurtosis predict higher subsequent market excess returns, which implies the investor’s learning generates the time variation of equity premium although the true distribution is static. The calibrated asset pricing model shows that the investor’s learning also explains the size and volatility of the equity premium observed in the data when the investor has a preference for early resolution of uncertainty.
