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Safety First Loss Probability And The Cross Section Of Expected Stock Returns
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Book Synopsis Safety First, Loss Probability, and the Cross Section of Expected Stock Returns by : Ji CAO
Download or read book Safety First, Loss Probability, and the Cross Section of Expected Stock Returns written by Ji CAO and published by . This book was released on 2019 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent studies show that loss probability (LP) is a decisive factor when people evaluate risk of assets in laboratory experiments, suggesting a positive relationship between LP and expected stock returns. This corresponds to the classical "Safety-First" principle. We find empirical support for this prediction in the U.S. stock market. During our sample period, average risk-adjusted return differences between stocks in the two extreme LP deciles exceed 0.73% per month. The positive LP effect, characterized by the intention of some investors to pay low prices for high LP stocks, remains significant after controlling for microcaps as in Hou et al. (2019).
Book Synopsis Value at Risk and Expected Stock Returns by : Turan G. Bali
Download or read book Value at Risk and Expected Stock Returns written by Turan G. Bali and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Stock size, liquidity, and value at risk (VAR) can explain the cross-sectional variation in expected returns, but market beta and total volatility have almost no power to capture the cross-section of expected returns at the stock level. Furthermore, the strong positive relationship between average returns and VAR is robust for different investment horizons and loss-probability levels. In addition to the cross-sectional regressions at the stock level, this study used a time-series approach to test the empirical performance of VAR at the portfolio level. The results, based on 25 size/book-to-market portfolios, indicate that VAR has additional explanatory power after the characteristics of market return, size, book-to-market ratio, and liquidity are controlled for.
Book Synopsis On the Cross Section of Conditionally Expected Stock Returns by : Hui Guo
Download or read book On the Cross Section of Conditionally Expected Stock Returns written by Hui Guo and published by . This book was released on 2003 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Extreme Bounds of the Cross-section of Expected Stock Returns by : J. Benson Durham
Download or read book The Extreme Bounds of the Cross-section of Expected Stock Returns written by J. Benson Durham and published by . This book was released on 2002 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Cross-section of Expected Stock Returns by : Eugene F. Fama
Download or read book The Cross-section of Expected Stock Returns written by Eugene F. Fama and published by . This book was released on 1992 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays on Predicting and Explaining the Cross Section of Stock Returns by : Xun Zhong
Download or read book Essays on Predicting and Explaining the Cross Section of Stock Returns written by Xun Zhong and published by . This book was released on 2019 with total page 181 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation consists of three chapters that study various aspects of stock return predictability. In the first chapter, I explore the interplay between the aggregation of information about stock returns and p-hacking. P-hacking refers to the practice of trying out various variables and model specifications until the result appears to be statistically significant, that is, the p-value of the test statistic is below a particular threshold. The standard information aggregation techniques exacerbate p-hacking by increasing the probability of the type I error. I propose an aggregation technique, which is a simple modification of 3PRF/PLS, that has an opposite property: the predictability tests applied to the combined predictor become more conservative in the presence of p-hacking. I quantify the advantages of my approach relative to the standard information aggregation techniques by using simulations. As an illustration, I apply the modified 3PRF/PLS to three sets of return predictors proposed in the literature and find that the forecasting ability of combined predictors in two cases cannot be explained by p-hacking. In the second chapter, I explore whether the stochastic discount factors (SDFs) of five characteristic-based asset pricing models can be explained by a large set of macroeconomic shocks. Characteristic-based factor models are linear models whose risk factors are returns on trading strategies based on firm characteristics. Such models are very popular in finance because of their superior ability to explain the cross-section of expected stock returns, but they are also criticized for their lack of interpretability. Each characteristic-based factor model is uniquely characterized by its SDF. To approximate the SDFs by a comprehensive set of 131 macroeconomic shocks without overfitting, I employ the elastic net regression, which is a machine learning technique. I find that the best combination of macroeconomic shocks can explain only a relatively small part of the variation in the SDFs, and the whole set of macroeconomic shocks approximates the SDFs not better than only few shocks. My findings suggest that behavioral factors and sentiment are important determinants of asset prices. The third chapter investigates whether investors efficiently aggregate analysts' earnings forecasts and whether combinations of the forecasts can predict announcement returns. The traditional consensus forecast of earnings used by academics and practitioners is the simple average of all analysts' earnings forecasts (Naive Consensus). However, this measure ignores that there exists a cross-sectional variation in analysts' forecast accuracy and persistence in such accuracy. I propose a consensus that is an accuracy-weighted average of all analysts' earnings forecasts (Smart Consensus). I find that Smart Consensus is a more accurate predictor of firms' earnings per share (EPS) than Naive Consensus. If investors weight forecasts efficiently according to the analysts' forecast accuracy, the market reaction to earnings announcements should be positively related to the difference between firms' reported earnings and Smart Consensus (Smart Surprise) and should be unrelated to the difference between firms' reported earnings and Naive Consensus (Naive Surprise). However, I find that market reaction to earnings announcements is positively related to both measures. Thus, investors do not aggregate forecasts efficiently. In addition, I find that the market reaction to Smart Surprise is stronger in stocks with higher institutional ownership. A trading strategy based on Expectation Gap, which is the difference between Smart and Naive Consensuses, generates positive risk-adjusted returns in the three-day window around earnings announcements.
Book Synopsis Another Look at the Cross-section of Expected Stock Returns by : S. P. Kothari
Download or read book Another Look at the Cross-section of Expected Stock Returns written by S. P. Kothari and published by . This book was released on 1994 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Cross Section of Expected Stock Returns Revisited by : Jean-Paul Sursock
Download or read book The Cross Section of Expected Stock Returns Revisited written by Jean-Paul Sursock and published by . This book was released on 2000 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Cross Section of Expected Stock Returns by : Jonathan Lewellen
Download or read book The Cross Section of Expected Stock Returns written by Jonathan Lewellen and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Cross-Section of Tail Risks in Stock Returns by : Kyle Moore
Download or read book The Cross-Section of Tail Risks in Stock Returns written by Kyle Moore and published by . This book was released on 2013 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates how the downside tail risk of stock returns is differentiated cross-sectionally. Stock returns follow heavy-tailed distributions with downside tail risk determined by the tail shape and scale. If safety-first investors are concerned with sufficiently large downside losses, i.e. have a sufficiently low risk tolerance, then in the equilibrium, assets traded in the same market share a homogeneous tail shape parameter. Furthermore, if tail shapes are homogeneous, the equilibrium prices of assets are differentiated by the scales.
Book Synopsis The Cross-section of Expected Stock Returns by : Steven McTavish
Download or read book The Cross-section of Expected Stock Returns written by Steven McTavish and published by . This book was released on 1996 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Conditional Betas, Higher Comoments and the Cross-section of Expected Stock Returns by : Lei Xu
Download or read book Conditional Betas, Higher Comoments and the Cross-section of Expected Stock Returns written by Lei Xu and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Cross-Section of Expected Stock Returns in Brazil by : Gyorgy Varga
Download or read book The Cross-Section of Expected Stock Returns in Brazil written by Gyorgy Varga and published by . This book was released on 2019 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Another Look at the Cross-Section of Expected Stock Returns by : Jay A. Shanken
Download or read book Another Look at the Cross-Section of Expected Stock Returns written by Jay A. Shanken and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Our examination of the cross-section of expected returns reveals economically and statistically significant compensation (about 6 to 9% per annum) for beta risk when betas are estimated from time-series regressions of annual portfolio returns on the annual return on the equal-weighted market index. The relation between book-to-market equity and returns is weaker than that in Fama and French (1992a). We conjecture that book-to-market results using COMPUSTAT data are affected by a selection bias and provide indirect evidence.
Book Synopsis On the Cross-section of Expected Stock Returns by :
Download or read book On the Cross-section of Expected Stock Returns written by and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Higher Idiosyncratic Moments and the Cross-section of Expected Stock Returns by : John Byong Tek Lee
Download or read book Higher Idiosyncratic Moments and the Cross-section of Expected Stock Returns written by John Byong Tek Lee and published by . This book was released on 2008 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Crash Sensitivity and the Cross-section of Expected Stock Returns by : Stefan Ruenzi
Download or read book Crash Sensitivity and the Cross-section of Expected Stock Returns written by Stefan Ruenzi and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: