Download or read book Asymmetry and Performance Metrics for Equity Returns written by Roger J. Bowden and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asymmetric Dependence in Finance written by Jamie Alcock and published by John Wiley & Sons. This book was released on 2018-06-05 with total page 312 pages. Available in PDF, EPUB and Kindle. Book excerpt: Avoid downturn vulnerability by managing correlation dependency Asymmetric Dependence in Finance examines the risks and benefits of asset correlation, and provides effective strategies for more profitable portfolio management. Beginning with a thorough explanation of the extent and nature of asymmetric dependence in the financial markets, this book delves into the practical measures fund managers and investors can implement to boost fund performance. From managing asymmetric dependence using Copulas, to mitigating asymmetric dependence risk in real estate, credit and CTA markets, the discussion presents a coherent survey of the state-of-the-art tools available for measuring and managing this difficult but critical issue. Many funds suffered significant losses during recent downturns, despite having a seemingly well-diversified portfolio. Empirical evidence shows that the relation between assets is much richer than previously thought, and correlation between returns is dependent on the state of the market; this book explains this asymmetric dependence and provides authoritative guidance on mitigating the risks. Examine an options-based approach to limiting your portfolio's downside risk Manage asymmetric dependence in larger portfolios and alternate asset classes Get up to speed on alternative portfolio performance management methods Improve fund performance by applying appropriate models and quantitative techniques Correlations between assets increase markedly during market downturns, leading to diversification failure at the very moment it is needed most. The 2008 Global Financial Crisis and the 2006 hedge-fund crisis provide vivid examples, and many investors still bear the scars of heavy losses from their well-managed, well-diversified portfolios. Asymmetric Dependence in Finance shows you what went wrong, and how it can be corrected and managed before the next big threat using the latest methods and models from leading research in quantitative finance.

Download or read book The Asymmetric Effect of Sentiment on Equity Returns written by Mishal Ahmed and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first chapter titled "The Asymmetric Effect of Sentiment on U.S. Equity Returns", we test the asymmetric impact of investor sentiment, proxied by the Baker-Wurgler (2007) investor sentiment index, on expected stock returns in the U.S. We regress sentiment on market and economy-wide fundamentals, use the residuals as a measure of excess sentiment and estimate long-horizon return regressions using positive and negative components of excess sentiment as predictors. We hypothesize that excessive optimism leads investors to make significant portfolio changes whereas excessive pessimism makes investors more cautious about investing, due to loss aversion. Primary results confirm our hypothesis with a significant positive sentiment coefficient and an insignificant negative sentiment coefficient. Our results hold for an alternative investor sentiment measure, multiple stock market indexes and stock portfolios based on book-to-market ratio, size, operational efficiency, and level of investment. Long-horizon regressions are plagued by two econometric problems: overlapping observations and persistent predictors. We correct for these issues by providing Hodrick (1992) standard errors. In the second chapter titled "The Asymmetric Effect of Sentiment on Global Equity Returns", we test if excess investor sentiment has an asymmetric impact on expected stock returns in thirteen industrialized countries, using long-horizon regression. We regress consumer confidence, a proxy for investor sentiment, on economic indicators and use residuals as a measure of excess sentiment for each country. We regress expected stock returns on positive and negative components of excess sentiment for 6,12,24 and 36 months horizon and correct for econometric problems associated with long-horizon regression by providing Hodrick (1992) standard errors. We find evidence of a statistically significant difference in the effect of bullish and bearish sentiment on stock returns for most countries in the sample. Primary results hold for portfolios based on book-to-market ratio, earnings-price ratio, and dividend yield. In the third chapter titled "Do Economic Surprises Affect Stock Returns? The Role of Sentiment", we test whether the effect of macroeconomic surprises on stock returns is impacted by investor sentiment, proxied by the Federal Reserve Bank of San Francisco’s daily sentiment index. We employ an event study methodology with separate regressions for six real economic indicators: GDP, industrial production, unemployment, retail sales, durable goods, and continuing jobless claims. We regress the daily stock returns for release dates of macroeconomic indicators on macroeconomic surprises. We test if positive and negative sentiment affects the portfolio choices of investors in response to unexpected macroeconomic news. We find consistent results with significant coefficients for pessimistic investors, as they make portfolio changes in response to news, and insignificant coefficients for optimistic investors, as they ignore news about real economic activity. We conclude that loss averse investors take a cautious approach to investing when they are bearish about overall stock market, unlike when they are bullish about stock market. Primary results hold for multiple stock market indexes, different stock portfolios and an alternative categorization of investor sentiment as low, high, and medium sentiment.

Download or read book The Asymmetry of Market Returns and Its Impact on the Mean Variance Frontier written by Jatikumar Sengupta and published by . This book was released on 1990 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asymmetric Returns written by Alexander M. Ineichen and published by John Wiley & Sons. This book was released on 2011-07-12 with total page 383 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Asymmetric Returns, financial expert Alexander Ineichen elevates the critical discussion about alpha versus beta and absolute returns versus relative returns. He argues that controlling downside volatility is a key element in asset management if sustainable positive compounding of capital and financial survival are major objectives. Achieving sustainable positive absolute returns are the result of taking and managing risk wisely, that is, an active risk management process where risk is defined in absolute terms and changes in the market place are accounted for. The result of an active risk management process-when successful-is an asymmetric return profile, that is, more and higher returns on the upside and fewer and lower returns on the downside. Ineichen claims that achieving Asymmetric Returns is the future of active asset management. Alexander M. Ineichen, CFA, CAIA, is Managing Director and Senior Investment Officer for the Alternative Investment Solutions team, a key provider within Alternative and Quantitative Investments, itself a business within UBS Global Asset Management. He is also on the Board of Directors of the Chartered Alternative Investment Analyst Association (CAIAA). Ineichen is the author of the two UBS research publications In Search of Alpha—Investing in Hedge Funds (October 2000) and The Search for Alpha Continues—Do Fund of Hedge Funds Add Value? (September 2001). As of 2006 these two reports were the most often printed research papers in the documented history of UBS. He is also author of the widely popular Absolute Returns—The Risk and Opportunities of Hedge Fund Investing, also published by John Wiley & Sons.

Download or read book Asymmetry In Operational Efficiency and Managerial Ability Benchmarks written by MUKTAK KRISHNACHANDRA TRIPATHI and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Standard empirical models of operating efficiency (OE) and managerial ability (MA) assume a symmetric linear relation of OE and MA with firm performance. However, OE and MA metrics are likely to respond faster to a demand decrease than a demand increase due to cost stickiness and respond faster to negative returns than to positive returns due to accounting conservatism. As predicted, I find large asymmetries in the behavior of OE and MA measures. OE and MA in levels (changes) are 2.4 (1.4) times and 1.5 (1.6) times more sensitive to demand decreases than demand increases. Similarly, OE and MA levels (changes) are 1.7 (1.5) times and 3.6 (2.3) times more sensitive to negative returns than to positive returns. The incremental explanatory power of modeling asymmetry in OE and MA levels (changes) is 20.9% (39.5%) and 263.3% (27.6%), measured as incremental adjusted R2. Cross-sectionally, asymmetry in OE and MA varies with the determinants of cost stickiness: (1) asset intensity and (2) employee intensity. Moreover, the degree of asymmetry also varies with the determinants of accounting conservatism: (1) book-to-market value of equity, (2) leverage, and (3) market capitalization. In addition, demand decline (i.e., cost stickiness) and bad news (i.e., accounting conservatism) during prior and successive periods have an incremental impact on the asymmetry in OE and MA. The standard models of OE and MA do not control for these correlated-omitted variables or incorporate the cost stickiness and accounting conservatism asymmetries, which yield biased measurements and render incorrect regression estimates and inferences.

Download or read book The Effect of Asymmetries on Stock Index Return Value at Risk Estimates written by Chris Brooks and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: There is much evidence in the literature that the volatilities of equity returns show evidence of asymmetric responses to good and bad news. At the same time, there is evidence that the unconditional distribution of stock returns is asymmetric as well. This paper examines the effects of asymmetries of various forms on the accuracy of value at risk models. We compare the value at risk estimates derived from models which assume both a symmetric unconditional distribution of returns and a symmetric response of volatility to good and bad news, with models which explicitly allow for each class of asymmetries. We find that, between the two types of asymmetry considered, the asymmetry in the unconditional distribution is the more important feature. Use of the semi-variance, which allows for this feature, is shown to provide more stable and more reliable value at risk estimates than simple and more complex models that do not.

Download or read book The Value of Managing Asymmetry Risk in a Portfolio of International Equity Indices written by Jamie Alcock and published by . This book was released on 2008 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the benefits gained by actively managing asymmetric dependence during the portfolio construction process. First, we determine the existing and nature of asymmetric dependency between international equity indices. Next, we illustrate how managing lower tail dependence between long/short and long only portfolio's results in a reduction in downside return movements with little expense to upside changes. We also find an accompanying reduction in the variability in returns over time. Finally, managing asymmetric dependency yields reduced changes in asset weights providing for reduced portfolio turnover as well as lower transaction costs and taxes which are often tied to the buying and selling of assets.

Download or read book Asymmetric Effects of Return and Volatility on Correlation between International Equity Markets written by Abderrahim Taamouti and published by . This book was released on 2009 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: How the correlation between equity returns behaves during market turmoils has been an issue of discussion in the international finance literature. Some research suggest an increase of correlation during volatile periods [Ang and Bekaert, 2002], while others argue its stability [Forbes and Rigobon, 2002]. In this paper, we study the impact of returns and volatility on correlation between international equity markets. Our objective is to determine if there is any asymmetry in correlation and identify the main explanation for this asymmetry. Within a framework of autoregressive models we quantify the relationship between return, volatility, and correlation using the generalized impulse response function and we test for the asymmetries in the return-correlation and volatility-correlation relationships. We also examine the implications of these asymmetric effects for the optimal international portfolio. Empirical evidence using weekly data on US, Canada, UK, and France equity indices, show that without taking into account the effect of return, there is an asymmetric impact of volatility on correlation. The volatility seems to have more impact on correlation during market upturn periods than during downturn periods. However, once we introduce the effect of return, the asymmetric impact of volatility on correlation disappears. These observations suggest that, the relation between volatility and correlation is an association rather than a causality. The strong increase in the correlation is driven by the market direction and the level of return rather than the level of the volatility. These results are confirmed using some tests of the asymmetry in volatility-correlation and return-correlation relationships in separate models and then in a joint model. Finally, we find that taking into account the asymmetric effect of return on correlation leads to an average financial gain ranged between 3.35 and 37.25 basis points for optimal international diversification.

Download or read book Information Asymmetry Liquidity and Stock Returns written by Sanders Chang and published by . This book was released on 2015 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a new measure for the probability of informed trading, called PCP. Using double-sorted portfolios, we find that excess returns increase from low to high PCP portfolios. In regression analysis, the effect of PCP on returns is significantly positive after controlling for illiquidity effect. The point estimate of the coefficient on one PCP is 3.788, suggesting that a difference of 10 percentage points in the PCP between two stocks leads to a difference in expected returns of 4.5 percent annually. Thus, the effect is also economically significant. Our results support the information asymmetry hypothesis that information risk is priced.

Download or read book Asymmetries in Stock Returns written by Yongmiao Hong and published by . This book was released on 2013 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we provide a model-free test for asymmetric correlations which suggest stocks tend to have greater correlations with the market when the market goes down than when it goes up. We also provide such tests for asymmetric betas and covariances. In addition, we evaluate the economic significance of asymmetric correlations by answering the question that what is the utility gain for an investor who switches from a belief of symmetric stock returns into a belief of asymmetric returns. Applying our methodology to three portfolios grouped by size, Fama and French's size and book-to-market, and industry, we find that asymmetries show up in sample estimates for all the portfolios, but they are statistically ignificant primarily for small size portfolios. Nevertheless, asymmetries are of substantial economic importance for an investor who switches her symmetry belief into an asymmetric one, irrespective of the portfolios.

Download or read book Alternative Conditional Asymmetry Specification for Stock Returns written by and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asymmetry in Return Reversals Or Asymmetry in Volatilities New Evidence from New Markets written by Ping Wang and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper analyses asymmetry in return reversals and in time-varying volatilities and their interactions using daily returns on the Shanghai Stock Exchange and Shenzhen Stock Exchange. It is concluded that asymmetry in volatilities arises from unconfirmed asymmetry in return reversals, or ambiguity in asymmetry in return reversals.

Download or read book An Alternative Conditional Asymmetry Specification for Stock Returns written by Kurt Brännäs and published by . This book was released on 2001 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asymmetry in Tail Dependence of Equity Portfolios written by Eric Jondeau and published by . This book was released on 2016 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: The asymmetry in the tail dependence between U.S. equity portfolios and the aggregate U.S. market is a well-established property. Given the limited number of observations in the tails of a joint distribution, standard non-parametric measures of tail dependence have poor finite-sample properties and generally reject the asymmetry in the tail dependence. A parametric model, based on a multivariate noncentral t distribution, is developed to measure and test asymmetry in tail dependence. This model allows different levels of tail dependence to be estimated depending on the distribution's parameters and accommodates situations in which the volatilities or the correlations across returns are time varying. For most of the size, book-to-market, and momentum portfolios, the tail dependence with the market portfolio is significantly higher on the downside than on the upside.

Download or read book Does Investor Diversity of Opinion Information Asymmetry or Uncertainty Resolution Affect Acquirer Returns written by Sara B. Moeller and published by . This book was released on 2006 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Several literatures predict a relation between acquirer announcement returns and uncertainty about the acquirer's growth prospects. Models with downward-sloping demand curves for stocks predict that an increase in shares outstanding leads to a lower stock price for firms with greater diversity of opinion among investors. Information asymmetry models imply that equity issues by firms with greater information asymmetries are accompanied by larger share price decreases. Valuation models predict a negative relation between uncertainty resolution and share prices. We find that, for our sample of firms with long-term analyst forecasts, acquirer abnormal returns for acquisitions of public firms paid for with equity decrease as proxies for the acquirer's diversity of opinion, information asymmetry, and/or uncertainty resolution increase. In contrast, abnormal returns for acquisitions of public firms paid for with cash and for acquisitions of private firms paid for with equity either are unaffected or increase as these proxies increase. Strikingly, while diversity of opinion can explain the abnormal returns difference between cash and equity offers for public firms, idiosyncratic volatility appears to be capable of explaining abnormal return differences between cash and equity offers for public firms as well as equity offers for private firms.

Download or read book Variance Asymmetry Managed Portfolios written by Xiaoxiao Tang and published by . This book was released on 2019 with total page 79 pages. Available in PDF, EPUB and Kindle. Book excerpt: I propose a forward-looking measure of the asymmetry in the variance of asset returns and introduce a way to estimate it from option prices. This measure is model free and it serves as a close approximation for the asset expected excess return. I provide an empirically supported sufficient condition under which the risk-neutral variance asymmetry ranks stocks based on their physical expected returns. Empirically, I find strong cross-sectional correlation between this measure and future stock returns. Variance asymmetry managed portfolios yield economically large average returns and Sharpe ratios. Crash risk and standard asset pricing factors do not explain this abnormal performance.