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Author : Steven L. Heston
Publisher :
ISBN 13 :
Total Pages : 16 pages
Book Rating : 4.:/5 (542 download)
Download or read book Testing Approximate Linear Asset Pricing Models written by Steven L. Heston and published by . This book was released on 1992 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Imane Munzer Dabbous
Publisher :
ISBN 13 :
Total Pages : 122 pages
Book Rating : 4.:/5 (787 download)
Download or read book Testing Linear Asset Pricing Models written by Imane Munzer Dabbous and published by . This book was released on 2007 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt: All asset pricing models are necessarily error-ridden. While most of them have f ound supporting evidence, all have inevitably been proven inadequate at some emp irical front. It is from this perspective that all asset pricing models must be considered. The present project attempts an exhaustive comparison of a number of linear asse t pricing models. These will be compared based on their ability to price the ass ets available in the US financial market. In particular, the Hansen-Jagannathan (1997) distance measure test will be the criterion by which models will be compa red and contrasted. It will be used repeatedly to draw conclusions as far as the performance of these models across variations involving the frequency of the da ta, and the conditional information. These sensitivity tests will allow for a ra ther comprehensive evaluation of some of the most popular models, also known as the variants of CAPM. The project is organized as follows. Chapter 1 introduces the topic. The next ch apter provides a discussion of the theoretical aspects of the paper including th e stochastic discount factor concept and the derivation of HJ-distance. Chapter 3 describes the asset pricing models to be evaluated and the parameterization of the different models. Chapter 4 discusses the data and documents the empirical results. The last chapter provides the interpretation of the results as well as concluding remarks.
Author : Soosung Hwang
Publisher :
ISBN 13 :
Total Pages : 41 pages
Book Rating : 4.:/5 (129 download)
Download or read book Testing Linear Factor Models on Individual Stocks Using the Average F Test written by Soosung Hwang and published by . This book was released on 2013 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose the average F statistic for testing linear asset pricing models. The average pricing error, captured in the the statistic, is of more interest than the ex post maximum pricing error of the multivariate F statistic that is associated with extreme long and short positions and excessively sensitive to small perturbations in the estimates of asset means and covariances. The average F test can be applied to thousands of individual stocks and thus is free from the information loss or the data snooping biases from grouping. This test is robust to ellipticity, and more importantly, our simulation and bootstrapping results show that the power of average F test continues to increase as the number of stocks increases. Empirical tests using individual stocks from 1967 to 2006 demonstrate that the popular four factor model (i.e. Fama-French three factors and momentum) is rejected two sub-periods from from 1967 to 1971 and from 1982 to 1986.
Author : Ryohei Oishi
Publisher :
ISBN 13 :
Total Pages : 46 pages
Book Rating : 4.:/5 (13 download)
Download or read book Testing Linear Factor Pricing Models with Individual Securities in Japan written by Ryohei Oishi and published by . This book was released on 2018 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study proposes a multivariate test for linear factor asset pricing models when the number of assets, N, is larger than the time dimension of returns, T. We extend the exact test proposed by Gibbons et al. (1989) to obtain a nonsingular covariance matrix with fewer estimation errors in the case of T
Author : Wayne Ferson
Publisher : MIT Press
ISBN 13 : 0262039370
Total Pages : 497 pages
Book Rating : 4.2/5 (62 download)
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.
Author : Todd Prono
Publisher :
ISBN 13 :
Total Pages : 48 pages
Book Rating : 4.:/5 (13 download)
Download or read book What to Do About a Latent Factor written by Todd Prono and published by . This book was released on 2015 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: A new model misspecification measure for linear asset pricing models is proposed. The origins of this measure are in Shanken (1987) and Kandel and Stambaugh (1985, 1995), where it is argued that the true market return is inherently latent and, as a consequence, only ever partially observed. Tests of asset pricing models that rely on the market return as a risk factor and are based, by necessity, on an observable proxy to this factor are then misspecified. The proposed misspecification measure, which assigns an upper bound to the correlation between the true market return and the observable proxy return used to conduct the test, can be estimated entirely and directly from observable data. This measure is suited both for testing models that include the market return as a pricing factor in a traditional sense (i.e., determining whether the given model does or does not price a collection of risky assets) and ranking those models (i.e., gauging which model performs the best). The measure is used to price portfolios reflecting the size, value, and momentum premiums. While neither the conditional CAPM nor the ICAPM is shown to offer any improvement over the simple CAPM, all three models are shown to perform materially better under the proposed measure, with improvements in model fit of as much as 45%. Also, it is discovered that winner stocks in a momentum portfolio may have higher market betas than loser stocks.
Author : Cheng-Few Lee
Publisher : Springer Science & Business Media
ISBN 13 : 0387262849
Total Pages : 861 pages
Book Rating : 4.3/5 (872 download)
Download or read book Encyclopedia of Finance written by Cheng-Few Lee and published by Springer Science & Business Media. This book was released on 2006-07-27 with total page 861 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a major new reference work covering all aspects of finance. Coverage includes finance (financial management, security analysis, portfolio management, financial markets and instruments, insurance, real estate, options and futures, international finance) and statistical applications in finance (applications in portfolio analysis, option pricing models and financial research). The project is designed to attract both an academic and professional market. It also has an international approach to ensure its maximum appeal. The Editors' wish is that the readers will find the encyclopedia to be an invaluable resource.
Author : Daniele Bianchi
Publisher :
ISBN 13 :
Total Pages : 42 pages
Book Rating : 4.:/5 (13 download)
Download or read book A Dynamic Test of Conditional Asset Pricing Models written by Daniele Bianchi and published by . This book was released on 2019 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: I use Bayesian tools to develop a dynamic testing methodology for conditional factor pricing models, in which time-varying betas, idiosyncratic risks, and factors risk premia are jointly estimated in a single step. Based on this framework, I test over fifty years of post-war monthly data some of the most common factor pricing models on size, book-to-market, and momentum deciles portfolios, both in the time series and in the cross section. The empirical results show that, a conditional specification of the recent five-factor model of Fama and French (2015) outperforms a set of theory-based competing linear pricing models along several dimensions.
Author : John H. Cochrane
Publisher : Princeton University Press
ISBN 13 : 1400829135
Total Pages : 560 pages
Book Rating : 4.4/5 (8 download)
Download or read book Asset Pricing written by John H. Cochrane and published by Princeton University Press. This book was released on 2009-04-11 with total page 560 pages. Available in PDF, EPUB and Kindle. Book excerpt: Winner of the prestigious Paul A. Samuelson Award for scholarly writing on lifelong financial security, John Cochrane's Asset Pricing now appears in a revised edition that unifies and brings the science of asset pricing up to date for advanced students and professionals. Cochrane traces the pricing of all assets back to a single idea--price equals expected discounted payoff--that captures the macro-economic risks underlying each security's value. By using a single, stochastic discount factor rather than a separate set of tricks for each asset class, Cochrane builds a unified account of modern asset pricing. He presents applications to stocks, bonds, and options. Each model--consumption based, CAPM, multifactor, term structure, and option pricing--is derived as a different specification of the discounted factor. The discount factor framework also leads to a state-space geometry for mean-variance frontiers and asset pricing models. It puts payoffs in different states of nature on the axes rather than mean and variance of return, leading to a new and conveniently linear geometrical representation of asset pricing ideas. Cochrane approaches empirical work with the Generalized Method of Moments, which studies sample average prices and discounted payoffs to determine whether price does equal expected discounted payoff. He translates between the discount factor, GMM, and state-space language and the beta, mean-variance, and regression language common in empirical work and earlier theory. The book also includes a review of recent empirical work on return predictability, value and other puzzles in the cross section, and equity premium puzzles and their resolution. Written to be a summary for academics and professionals as well as a textbook, this book condenses and advances recent scholarship in financial economics.
Author : Jad Zouheir Nohra
Publisher :
ISBN 13 :
Total Pages : 132 pages
Book Rating : 4.:/5 (787 download)
Download or read book Testing the Linear Relationship of the Capital Asset Pricing Model written by Jad Zouheir Nohra and published by . This book was released on 2007 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main purpose of the project is to relate the risk of assets to their expecte d returns (mainly assets that are traded on a handful of developed markets, incl uding US, Japanese, French, and German exchanges). In order to do so, we refer t o the Capital Asset Pricing Model (CAPM) which consists of relating the risk of an asset to its expected return by comparing it to the overall stock market. Thi s model is based on the existence of a linear relationship between the expected return of a given asset, and the market rate of return. Consequently, any return that is not explained by this linear relationship (abnormal return) will lead u s to reject the theoretical linear relationship stated and formulated in the CAP M. The first chapter will introduce the topic. The second chapter consists of prese nting the CAPM, its critiques and extensions. In the third chapter, a literature review will be conducted. Then, in the fourth chapter I will undertake time ser ies/cross-sectional analyses of the aforementioned equity markets in order to te st the CAPM model itself. The same stocks will be tested using the international version of the model. Finally, in the fifth chapter I will conclude with the im plications of my findings for asset pricing and investment.
Author : Todd Prono
Publisher :
ISBN 13 :
Total Pages : 39 pages
Book Rating : 4.:/5 (129 download)
Download or read book Market Proxies as Factors in Linear Asset Pricing Models written by Todd Prono and published by . This book was released on 2015 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: A new model misspecification measure for linear asset pricing models is proposed for the case where misspecification maps to latency of one of the pricing factors; in this case, the market return. This measure is suited both for testing models that include the market return as a pricing factor in a traditional sense (i.e., whether the chosen model does or does not price a collection of risky assets) and ranking those models (i.e., determining which model performs best). The proposed measure is used in pricing portfolios reflecting the size, value, and momentum premia. The conditional CAPM of Jagannathan and Wang (1996) is found to best the performance of both the simple CAPM and the ICAPM of Petkova (2006). Moreover, it is discovered that winner stocks in a momentum portfolio may have higher market betas than loser stocks.
Author : Andrew Wen-Chuan Lo
Publisher : Edward Elgar Publishing
ISBN 13 :
Total Pages : 680 pages
Book Rating : 4.3/5 ( download)
Download or read book Static Asset-pricing Models written by Andrew Wen-Chuan Lo and published by Edward Elgar Publishing. This book was released on 2007 with total page 680 pages. Available in PDF, EPUB and Kindle. Book excerpt: Presents a selection of the most important articles in the field of financial econometrics. Starting with a review of the philosophical background, this collection covers such topics as the random walk hypothesis, long-memory processes, asset pricing, arbitrage pricing theory, variance bounds tests, term structure models, and more.
Download or read book Improved Testing for the Efficiency of Asset Pricing Theories in Linear Factor Models written by and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The Business School of the City University of London presents the Financial Econometrics Research Centre (FERC) working paper entitled "Improved Testing for the Efficiency of Asset Pricing Theories in Linear Factor Models," by Soosung Hwang and Stephen E. Satchell. The paper was published in August 2000 and is in PDF format. The authors discuss the testing of asset pricing theories in linear factor models.
Author : Tlek Zeinullayev
Publisher :
ISBN 13 :
Total Pages : 92 pages
Book Rating : 4.:/5 (93 download)
Download or read book Testing Identification in Asset Pricing Models written by Tlek Zeinullayev and published by . This book was released on 2013 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Stefano Giglio
Publisher :
ISBN 13 :
Total Pages : 91 pages
Book Rating : 4.:/5 (13 download)
Download or read book Thousands of Alpha Tests written by Stefano Giglio and published by . This book was released on 2020 with total page 91 pages. Available in PDF, EPUB and Kindle. Book excerpt: Data snooping is a major concern in empirical asset pricing. We develop a new framework to rigorously perform multiple hypothesis testing in linear asset pricing models, while limiting the occurrence of false positive results typically associated with data snooping. By exploiting a variety of machine learning techniques, our multiple-testing procedure is robust to omitted factors and missing data. We also prove its asymptotic validity when the number of tests is large relative to the sample size, as in many finance applications. To improve the finite sample performance, we also provide a wild-bootstrap procedure for inference and prove its validity in this setting. Finally, we illustrate the empirical relevance in the context of hedge fund performance evaluation.
Author : Eleftherios Giovanis
Publisher : GRIN Verlag
ISBN 13 : 3640576799
Total Pages : 94 pages
Book Rating : 4.6/5 (45 download)
Download or read book Application of Capital Asset Pricing (CAPM) and Arbitrage Pricing Theory (APT) Models in Athens Exchange Stock Market written by Eleftherios Giovanis and published by GRIN Verlag. This book was released on 2010-03-26 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2007 in the subject Business economics - Investment and Finance, grade: 90.0%, , language: English, abstract: This paper examines the estimating and forecasting performance of the different and various Generalized Autoregressive Conditional Heteroscedasticity-GARCH’s models in relation to Capital Asste Pricing Model (CAPM) model. We apply the CAPM model with ordinary least squares (OLS) method to investigate if an ARCH (Autoregressive Conditional Heteroscedasticity) is presented and we are trying to decide and to analyze which GARCH model is the most appropriate and the best fitted for the financial time series that we have chosen. We apply CAPM model in the financial time series of the share prices of Technology-Software Sector in Athens Exchange stock market for the period January 1st of 2002 to October 30th of 2007 for the enterprises “Unibrain” “MLS Informatics” and “Dionic” respectively , from April 2nd of 2002 to 30th October of 2007 for the enterprise “Compucon”, from August 2nd of 2002 to 30th October of 2007 for the enterprise “Centric”, and finally from February 2nd of 2004 to 30th October of 2007 for the enterprise “Ilyda”. Additionally, we apply roiling regressions, where the full programming routines in EVIEWS and MATLAB are described detailed. We conclude that the slope β coefficient of CAPM model is not constant through the time period of rolling regressions we apply. In the final part we examine a simple Arbitrage Pricing Theory (APT) model.
Author : Nikolay Gospodinov
Publisher :
ISBN 13 :
Total Pages : 62 pages
Book Rating : 4.:/5 (13 download)
Download or read book Spurious Inference in Unidentified Asset-Pricing Models written by Nikolay Gospodinov and published by . This book was released on 2015 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies some seemingly anomalous results that arise in possibly misspecified and unidentified linear asset-pricing models estimated by maximum likelihood and one-step generalized method of moments (GMM). Strikingly, when useless factors (that is, factors that are independent of the returns on the test assets) are present, the models exhibit perfect fit, as measured by the squared correlation between the model's fitted expected returns and the average realized returns, and the tests for correct model specification have asymptotic power that is equal to the nominal size. In other words, applied researchers will erroneously conclude that the model is correctly specified even when the degree of misspecification is arbitrarily large. We also derive the highly nonstandard limiting behavior of these invariant estimators and their t-tests in the presence of identification failure. These results reveal the spurious nature of inference as useless factors are selected with high probability, while useful factors are driven out from the model. The practical relevance of our findings is demonstrated using simulations and an empirical application.
