Download or read book Essays in Asset Pricing and Labor Markets written by Mete Kilic and published by . This book was released on 2017 with total page 322 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first chapter, "Asset Pricing Implications of Hiring Demographics," I document that U.S. industries that shift their skilled workforce toward young employees exhibit higher expected equity returns. The young-minus-old (YMO) hiring return spread comoves negatively with value-minus-growth while being significantly positive on average. Exposure to the YMO spread accounts for a significant portion of annual momentum profits at the industry level. I find that an adjustment of the skilled workforce toward young employees is associated with greater productivity in new capital inputs of an industry. This motivates a risk-based explanation for the YMO spread, and its interaction with value and momentum. A model of investment and hiring where young and experienced employees are equipped with differential roles in production and investment can account for the empirical findings. The second chapter, "Risk, Unemployment, and the Stock Market: A Rare-Event-Based Explanation of Labor Market Volatility," co-authored with Jessica A. Wachter, answers the following questions: What is the driving force behind the cyclical behavior of unemployment and vacancies? What is the relation between job-creation incentives of firms and stock market valuations? Our model features time-varying risk, modeled as a small and variable probability of an economic disaster. A high probability implies greater risk and lower future growth, lowering the incentives of firms to invest in hiring. During periods of high risk, stock market valuations are low and unemployment rises. The model thus explains volatility in equity and labor markets, and the relation between the two.

Download or read book Essays in Empirical Asset Pricing written by Ali Sharifkhani and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In my dissertation, I study different channels through which shocks in the real economy can affect financial asset returns. The first chapter studies immigration policy shocks as a source of risk in the financial markets. Using a comprehensive set of data on H-1B visa petitions, I construct an occupation-level measure for labor market competition between skilled immigrant and local workers. I find that stocks of firms with a high share of labor for which skilled immigrants are close substitutes outperform their peers with a low share. I show that this premium is explained by firms' differential exposures to priced immigration policy shocks that shift the supply of skilled immigrant labor. These shocks differentially impact wages across occupations, leading to an asymmetric effect on firms' cash flows through labor expenditure. In the second chapter, based on a joint work with Esther Eiling and Raymond Kan, we investigate the asset pricing implications of sectoral labor reallocation shocks that change the optimal allocation of workers across industries. We find that a proxy for this type of labor market shocks has very strong predictive power for future stock market returns. We propose a production-based asset pricing model that links the return predictability to time-varying labor adjustment costs. When human capital is tied to the industry, hiring workers from other industries involves more search and training costs. Hence, sectoral reallocation shocks lead to lower returns to hiring and therefore lower future stock returns. In the third chapter, we identify inter-sectoral trade networks as important conduits of industry shocks and provide the first explanation for an empirical regularity in the term structure of industry returns. Specifically, my co-author Mikhail Simutin and I show that industry shocks propagating along this network can feed back to the originating industry, causing an "echo'' - intermediate-term autocorrelation in returns. Adopting techniques from graph theory, we find that the strength of the trade network feedback is a crucial determinant of the echo effect in industry returns. Consistent with limited-information models, the relation between feedback strength and echo profits is strongest in industries with information diffusion frictions along the feedback loop.

Download or read book Essays on Human Capital Mobility and Asset Pricing written by Andres Francisco Donangelo and published by . This book was released on 2011 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation explores the intersection between labor and financial markets, in which labor mobility plays a fundamental role. Unlike physical assets such as buildings or machines, human capital can actually walk away from the firm as employees and managers switch employers. The interaction between labor mobility, firm risk and human capital has been remarkably under-researched until now. The main question of this broad project is how differences in the flexibility of workers to find employment across different industries--labor mobility--affects the owners of human and physical capital. The three parts of the dissertation look at this question from different angles. The first part, Labor Mobility and the Cross-Section of Expected Returns, focuses on the effect of labor mobility on the degree of operating leverage of a firm and thus on asset returns. I construct a dynamic model where worker's employment decisions affect the productivity of capital and asset prices in predictable ways. The model shows that reliance on a workforce with flexibility to enter and exit an industry translates into a form of operating leverage that amplifies equity-holders' exposure to productivity shocks. Consequently, firms in an industry with mobile workers have higher systematic risk loadings and higher expected asset returns. I use data from the Bureau of Labor Statistics to construct a novel measure of labor supply mobility, in line with the model, based on the composition of occupations across industries over time. I document a positive and economically significant cross-sectional relation between measures of labor mobility, operating leverage, and expected asset returns. This relation is not explained by firm characteristics known in the literature to predict expected returns. The second part, Aggregate Asset-Pricing Implications of Human Capital Mobility in General Equilibrium, extends the model in the first chapter to consider the general equilibrium implications of labor mobility. The setup is based on a multi-industry dynamic economy with production. The extended model shows that mobility of labor affects not only cash-flows, but also aggregate risk, and the equity premium. This part considers two different types of human capital. Generalist human capital can move between industries, while specialized human capital and physical capital cannot. The greater relative mobility of human capital relative to physical capital affects how aggregate risk in the economy is split between these two components of total wealth. The model shows that aggregate consumption and wealth increase when human capital is more mobile. However, at the same time, aggregate risk and the equity risk premium also increase under human capital mobility. I assume that the workforce in the economy is exogenously given in the first two chapters of this dissertation. This assumption is relaxed in the third chapter, Investments in Human Capital and Expected Asset Returns, where I endogenize the composition of occupations to discuss the interaction between human capital investments and labor mobility. This chapter focuses on the decision of workers to acquire different types of costly human capital with different degrees of associated labor mobility. This part introduces a two-sector general-equilibrium model with production and investments in human capital (i.e. education). Ex-ante identical workers face a trade-off between breadth and depth in the acquisition of industry-specific labor productivity. This chapter derives sufficient conditions for the existence of mobile workers. When these conditions are met, a fraction of workers chooses to acquire mobile but less productive generalist skills, even when labor risk can be fully hedged in financial markets.

Download or read book Essay on Labor technology Substitution and Asset Pricing written by Miao Zhang (Ph. D.) and published by . This book was released on 2016 with total page 244 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation aims at understanding how firms' adoption of labor-saving production technologies affects their investment and employment decisions; and, ultimately, their stock returns. Chapter 1 theoretically studies a firm's decision to replace its routine-task labor with machines over the business cycle, and explores the asset pricing implications of this decision. The model extends the classical investment-based asset pricing models in which a firm's investment decisions are modeled as exercising real options. I extend the set of firm's real options to include both growth options, which increase the firm's output, and technology switching options, which increase the firm's efficiency, and focus on the latter options. A key assumption in my model is that switching from using routine-task labor to using machines interrupts firm production. Hence, the firm optimally chooses to make this switch when its profitability is low in order to minimize opportunity cost. As a result, if the economy experiences a negative shock, firms with routine-task labor can improve their value through exercising these switching options, making their value less sensitive to aggregate shocks. In the cross-section, firms with a higher share of routine-task labor should have lower expected rates of return for their stocks. Chapter 2 constructs an empirical measure of firms' share of routine-task labor, namely, RShare, and presents tests of the model's predictions on the investment, employment, and asset prices of firms with high and low RShares. I classify occupations into routine- and non-routine-task labor, following the labor economics literature, and I use the establishment-level occupational data from the Bureau of Labor Statistics to construct RShare at the firm level. Consistent with my model's predictions, I find that within an industry, firms with a higher share of routine-task labor (i) invest more in machines and reduce disproportionately more of their routine-task labor during economic downturns, and (ii) have lower equity betas and returns.

Download or read book Selected Essays in Empirical Asset Pricing written by Christian Funke and published by Springer Science & Business Media. This book was released on 2008-09-15 with total page 123 pages. Available in PDF, EPUB and Kindle. Book excerpt: Christian Funke aims at developing a better understanding of a central asset pricing issue: the stock price discovery process in capital markets. Using U.S. capital market data, he investigates the importance of mergers and acquisitions (M&A) for stock prices and examines economic links between customer and supplier firms. The empirical investigations document return predictability and show that capital markets are not perfectly efficient.

Download or read book Essays on Asset Pricing written by Ziwen Bu and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Asset Pricing and Capital Markets microform written by Sivakumar, Ranjini M. (Ranjini Mony) and published by National Library of Canada = Bibliothèque nationale du Canada. This book was released on 1998 with total page 274 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Asset Pricing and Capital Markets written by and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

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.

Download or read book Essays on Macroeconomic Implications of Financial and Labor Markets and Political Processes written by Karl Brunner and published by . This book was released on 1984 with total page 338 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Two Essays on Asset Pricing and Options Market written by Huimin Zhao and published by Open Dissertation Press. This book was released on 2017-01-27 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "Two Essays on Asset Pricing and Options Market" by Huimin, Zhao, 趙慧敏, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. DOI: 10.5353/th_b4150839 Subjects: Options (Finance) Capital assets pricing model

Download or read book Essays on Asset Pricing written by Bosung Jang and published by . This book was released on 2017 with total page 140 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies how asset prices are related to various macroeconomic and financial factors. In the first chapter, I examine the influence of external financing costs on growth and asset prices. Using U.S. high-tech firm data and the aggregate financing cost measure of Eisfeldt and Muir (2016), I find that an increase in financing cost can have negative effects on R&D by reducing equity finance. This result suggests that financing cost can have substantial impacts on long-run productivity through the R&D channel. Motivated by this idea, I construct a general equilibrium model where financing costs affect innovation activities and future productivity. My model endogenously generates long-run risk and matches key features of macroeconomic and asset price data. The model produces a sizable equity premium, doing a good job of matching macro moments in the data. Furthermore, a large risk premium of R&D-intensive stocks is justified in the model as in the data. In addition, as a higher financing cost forecasts lower productivity growth in the model, this prediction is supported by empirical evidence. In the second chapter, I investigate whether heterogeneity between domestic and foreign households can help explain the cross-section of stock returns. For this analysis, I apply Yogo’s (2006) durable consumption model to a two-country setting using Korean stock market data. In Korea, U.S. investors have been a dominant foreign investor group, given that the total share of foreigners is considerably large. By incorporating the stochastic discount factor of the U.S. into the model, I find that it plays a significant role in pricing assets. In particular, our model is successful in accounting for the expected excess return of relatively high book-to-market equity groups, producing lower pricing errors than the Fama-French 3 factor model. In the third chapter, I study the effects of debt maturity choice on stock returns and financial structure. I construct a model where firms can issue both short-term and long-term bonds, subject to collateral constraints. I also assume that, when they run financial deficits, firms use equity finance paying issuance costs. The model performs well in matching empirical facts about stock returns and the financial structure of firms. In addition, the model provides an interesting implication that firms substitute between leverage and maturity. In the literature, theoretical explanations for the substitution relationship have been mainly based on conflicts between stakeholders. Without hinging on the contract-theoretic approach, my model replicates the theoretical prediction.

Download or read book Essays in Financial Economics written by Hang Bai and published by . This book was released on 2016 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three chapters that aim to understand the fundamental relations between asset prices and the real/financial decisions of firms. The first chapter studies the credit risk implications of labor market fluctuations, by incorporating defaultable debt into a textbook search model of unemployment. In the model, the present value of cash flows that firms extract from workers simultaneously drives unemployment dynamics and credit risk variation. The model generates fat right tails in both unemployment and credit spreads, and their strong comovement over the business cycle, in line with the historical U.S. data from 1929 to 2015. Quantitatively, the model reasonably replicates the level, volatility and cyclicality of credit spreads. Overall, the paper highlights labor market fluctuations as an important macroeconomic driver of credit risk variation. In the second chapter, co-authored with Kewei Hou, Howard Kung, and Lu Zhang, we study how rare economic disasters, events such as the Great Depression, affect the cross section of stock returns, in particular the relation between the CAPM and the value premium. In historical U.S. data, it is well-established that the CAPM fails miserably to explain the value premium during the post-Compustat period. Perhaps less well-known is that the CAPM turns out to capture the value premium pretty well during the long sample period from 1929 to 2014. To understand the drivers behind the differential performance of the CAPM, we embed disasters into a stylied investment-based asset pricing model. The key result is that our single-factor model reproduces the failure of the CAPM in explaining the value premium in finite samples in which disasters are not materialized, and its relative success in samples in which disasters are materialized. Due to measurement errors in pre-ranking market betas, the relation between these estimated betas and average returns is flat in simulations, consistent with the beta “anomaly,” even though the relation between true betas and expected returns is strongly positive. The third chapter empirically examines how asset returns vary over the credit cycle. I construct a variable called Corporate Credit Growth (hereafter CCG) to capture the phase of the credit cycle, and show that CCG strongly negatively predicts future excess stock returns both in sample and out of sample. A one-standard-deviation decrease in CCG is associated with a sizable 1.5% increase in the equity premium over the next quarter. The predictive power of CCG can not be accounted for by a wide range of previously studied predictors. Impulse response analysis indicates CCG contains information about the term structure of expected stock returns. Finally, the paper examines alternative indicators of the credit cycle and finds that credit flows to other sectors of the economy do not appear to predict returns in the equity market.

Download or read book Essays on International Finance and Asset Pricing written by Thomas Yang Powers and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: My first essay investigates the relationship between risk and return for investment projects within the firm. I focus on the film industry and find that more volatile movies have higher rates of return, even though this risk is entirely idiosyncratic. My second essay explains the high rates of return on commodity currencies in terms of the procyclicality of commodity prices. Commodity prices are procyclical because commodities are inputs, and thus demand for them is driven by the global business cycle. I also use labor market data to show that increases in labor costs during commodity booms contribute to the higher real exchange rates observed in commodity exporting countries. My final essay, co-authored with Jeffrey Frankel, studies optimal monetary policy in commodity-exporting economies facing a terms-of-trade shock. We build on the previous literature by introducing borrowing constraints, and find that currency depreciation during such a shock leads to higher welfare than either a fixed exchange rate or inflation targeting.

Download or read book Two Essays on Asset Pricing written by Dan Luo and published by . This book was released on 2017-01-26 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "Two Essays on Asset Pricing" by Dan, Luo, 罗丹, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: This thesis centers around the pricing and risk-return tradeoff of credit and equity derivatives. The first essay studies the pricing in the CDS Index (CDX) tranche market, and whether these instruments have been reasonably priced and integrated within the financial market generally, both before and during the financial crisis. We first design a procedure to value CDO tranches using an intensity-based model which falls into the affine model class. The CDX tranche spreads are efficiently explained by a three-factor version of this model, before and during the crisis period. We then construct tradable CDX tranche portfolios, representing the three default intensity factors. These portfolios capture the same exposure as the S&P 500 index optionmarket, to a market crash. We regress these CDX factors against the underlying index, the volatility factor, and the smirk factor, extracted from the index option returns, and against the Fama-French market, size and book-to-market factors. We finally argue that the CDX spreads are integrated in the financial market, and their issuers have not made excess returns. The second essay explores the specifications of jumps for modeling stock price dynamics and cross-sectional option prices. We exploit a long sample of about 16 years of S&P500 returns and option prices for model estimation. We explicitly impose the time-series consistency when jointly fitting the return and option series. We specify a separate jump intensity process which affords a distinct source of uncertainty and persistence level from the volatility process. Our overall conclusion is that simultaneous jumps in return and volatility are helpful in fitting the return, volatility and jump intensity time series, while time-varying jump intensities improve the cross-section fit of the option prices. In the formulation with time-varying jump intensity, both the mean jump size and standard deviation of jump size premia are strengthened. Our MCMC approach to estimate the models is appropriate, because it has been found to be powerful by other authors, and it is suitable for dealing with jumps. To the best of our knowledge, our study provides the the most comprehensive application of the MCMC technique to option pricing in affine jump-diffusion models. DOI: 10.5353/th_b4819935 Subjects: Capital assets pricing model

Download or read book Essays on Asset Pricing in Credit Markets written by Frederic A. Schweikhard and published by . This book was released on 2012 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays in Asset Pricing written by Yoon Kang Lee and published by . This book was released on 2018 with total page 157 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is comprised of three chapters that aim to understand how the interactions between various investors and instruments in financial markets are linked to asset prices.