Author : Keming Li
Publisher :
ISBN 13 :
Total Pages : 114 pages
Book Rating : 4.:/5 (892 download)
Book Synopsis Reassessing Anomalies and Puzzles by : Keming Li
Download or read book Reassessing Anomalies and Puzzles written by Keming Li and published by . This book was released on 2014 with total page 114 pages. Available in PDF, EPUB and Kindle. Book excerpt: While standard asset pricing models assume a frictionless environment and investors are risk-averse individuals who maximize their utility based on all the available information in real time. The asset pricing literature has empirically documented numerous anomalies and puzzles, which cannot be explained by the traditional finance theory. Investors are exposed to these entire abnormal phenomenons, but at the same time investors do not fully understand them. This problem motives numbers of recent publications and also my dissertation. My dissertation is consisting of three essays. The first essay looks at the components of information uncertainty. Specifically, I decompose information uncertainty into fundamental uncertainty and valuation uncertainty and find these components of information uncertainty are systematically related to financial distress. The second essay focus on an empirical puzzle: the distress puzzle. While the distress literature shows that there is a negative relationship between distress risk and expected stock returns, the reason is not fully understood. This essay provides empirical evidence that rejects the strategy action hypothesis and supports the risk shifting hypothesis in reconciling this puzzle. The third essay examines the effect of acquirer likelihood on future stock returns. In sharp contrast to prior findings, acquirer likelihood is a strong and negative predictor of cross-sectional future returns after controlling for target likelihood, which casts doubt on the rational risk explanation.