Download or read book Three Essays on Testing Asset Pricing Models in the Korean Stock Market written by Hee-Kyung K. Bark and published by . This book was released on 1991 with total page 156 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Evaluating Asset Pricing Models in the Korean Stock Market written by Soon-Ho Kim and published by . This book was released on 2014 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper evaluates and compares asset pricing models in the Korean stock market. The asset pricing models considered are the CAPM, APT-motivated models, the Consumption-based CAPM, Intertemporal CAPM-motivated models, and the Jagannathan and Wang conditional CAPM model. By using various test portfolios as well as individual stocks, we conduct time-series tests and cross-sectional regression tests based on individual t-tests, the joint F-tests, the Hansen and Jagannathan (1997) distance, and R-squares. Overall, the Fama and French (1993) five-factor model performs most satisfactorily among the asset pricing models considered in explaining the intertemporal and cross-sectional behavior of stock returns in Korea. The Fama and French (1993) three-factor model, the Chen, Novy-Marx, and Zhang (2010) three-factor model, and the Campbell (1996) model are the next. The results indicate that the two bond portfolios, term spread and default spread, play an important role in explaining stock returns in Korea.
Download or read book Essays on Asset Pricing Models written by Yan Li and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation contains three chapters. Chapter one proposes a nonparametric method to evaluate the performance of a conditional factor model in explaining the cross section of stock returns. There are two tests: one is based on the individual pricing error of a conditional model and the other is based on the average pricing error. Empirical results show that for valueweighted portfolios, the conditional CAPM explains none of the asset-pricing anomalies, while the conditional Fama-French three-factor model is able to account for the size effect, and it also helps to explain the value effect and the momentum effect. From a statistical point of view, a conditional model always beats a conditional one because it is closer to the true data-generating process. Chapter two proposes a general equilibrium model to study the implications of prospect theory for individual trading, security prices and trading volume. Its main finding is that different components of prospect theory make different predictions. The concavity/convexity of the value function drives a disposition effect, which in turn leads to momentum in the cross-section of stock returns and a positive correlation between returns and volumes. On the other hand, loss aversion predicts exactly the opposite, namely a reversed disposition effect and reversal in the cross-section of stock returns, as well as a negative correlation between returns and volumes. In a calibrated economy, when prospect theory preference parameters are set at the values estimated by the previous studies, our model can generate price momentum of up to 7% on an annual basis. Chapter three studies the role of aggregate dividend volatility in asset prices. In the model, narrow-framing investors are loss averse over fluctuations in the value of their financial wealth. Persistent dividend volatility indicates persistent fluctuation in their financial wealth and makes stocks undesirable. It helps to explain the salient feature of the stock market including the high mean, excess volatility, and predictability of stock returns while maintaining a low and stable risk-free rate. Consistent with the data, stock returns have a low correlation with consumption growth, and Sharpe ratios are time-varying.
Download or read book Essays on the Specification Testing for Dynamic Asset Pricing Models written by Jaeho Yun and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays on the subjects of specification testing on dynamic asset pricing models. In the first essay (with Yongmiao Hong), "A Simulation Test for Continuous-Time Models," we propose a simulation method to implement Hong and Li's (2005) transition density-based test for continuous-time models. The idea is to simulate a sequence of dynamic probability integral transforms, which is the key ingredient of Hong and Li's (2005) test. The proposed procedure is generally applicable whether or not the transition density of a continuous-time model has a closed form and is simple and computationally inexpensive. A Monte Carlo study shows that the proposed simulation test has very similar sizes and powers to the original Hong and Li's (2005) test. Furthermore, the performance of the simulation test is robust to the choice of the number of simulation iterations and the number of discretization steps between adjacent observations. In the second essay (with Yongmiao Hong), "A Specification Test for Stock Return Models," we propose a simulation-based specification testing method applicable to stochastic volatility models, based on Hong and Li (2005) and Johannes et al. (2008). We approximate a dynamic probability integral transform in Hong and Li' s (2005) density forecasting test, via the particle filters proposed by Johannes et al. (2008). With the proposed testing method, we conduct a comprehensive empirical study on some popular stock return models, such as the GARCH and stochastic volatility models, using the S&P 500 index returns. Our empirical analysis shows that all models are misspecified in terms of density forecast. Among models considered, however, the stochastic volatility models perform relatively well in both in- and out-of-sample. We also find that modeling the leverage effect provides a substantial improvement in the log stochastic volatility models. Our value-at-risk performance analysis results also support stochastic volatility models rather than GARCH models. In the third essay (with Yongmiao Hong), "Option Pricing and Density Forecast Performances of the Affine Jump Diffusion Models: the Role of Time-Varying Jump Risk Premia," we investigate out-of-sample option pricing and density forecast performances for the affine jump diffusion (AJD) models, using the S&P 500 stock index and the associated option contracts. In particular, we examine the role of time-varying jump risk premia in the AJD specifications. For comparison purposes, nonlinear asymmetric GARCH models are also considered. To evaluate density forecasting performances, we extend Hong and Li's (2005) specification testing method to be applicable to the famous AJD class of models, whether or not model-implied spot volatilities are available. For either case, we develop (i) the Fourier inversion of the closed-form conditional characteristic function and (ii) the Monte Carlo integration based on the particle filters proposed by Johannes et al. (2008). Our empirical analysis shows strong evidence in favor of time-varying jump risk premia in pricing cross-sectional options over time. However, for density forecasting performances, we could not find an AJD specification that successfully reconcile the dynamics implied by both time-series and options data.
Download or read book Three Essays on Asset Pricing written by Zhi Da and published by . This book was released on 2006 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Three Essays on Asset Pricing Models in Discrete and Continuous Time written by Kyou Yung Kim and published by . This book was released on 1988 with total page 65 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.
Download or read book Validity of the Asset Pricing Models in Applications to the U S and Korean Markets written by Woong Bae Kim and published by . This book was released on 2018 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Being a simple and intuitive model, the capital asset pricing model (CAPM) has been widely applied to countless cases that require asset pricing for decades. However, there have been doubts about the model recently regarding its loss of explanatory power. Therefore, I will be checking on the validity of CAPM in two different markets, the U.S. and Korean markets, and different periods using the Fama-Macbeth method. Fama-French (1993, 2015) Factor models are also ground-breaking models that incorporate empirical evidence for size and value premium into asset pricing model. I will also be exploring not only the validity of both the Three Factor and the Five Factor models but also the types of flaws they have in different markets.
Download or read book Three Essays on International Asset Pricing written by Tae-Hoon Lim and published by . This book was released on 2013 with total page 183 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies international linkages between stock returns and information trading in options. In Chapter 2, "How Important are Foreign Ownership Linkages for International Stock Returns?" joint work with Söhnke M. Bartram, John Griffin, and David Ng, we look develop a simple measure of international ownership linkages and show that this measure is of similar importance as the traditional effects coming from country and industry fundamentals. International ownership linkages are not explained by omitted country/industry variations, wealth effects or other explanations like liquidity, investment style, or fund flows. We find that ownership linkage is a summary measure of investment locale that links investor capital around the world. Beyond the level of foreign ownership, the specific ownership composition of a stock is an important facet of international equity returns - a finding which has important implications for diversification. In Chapter 3, "Trade Linkage and Cross-country Stock Return Predictability", I test whether cross-predictability exists among trade-linked industries across international borders, and explore possible explanations. I find strong evidence of cross-border stock return predictability among trade-linked industries. A trading strategy of buying industry portfolios whose trade-linked industry had high returns, and shorting industry portfolios whose trade-linked industry had low returns, yields an annualized return of 12%. I find some evidence against the leading explanation, which posits information segmentation as the only reason for cross-predictability, and find support for illiquidity as a new channel of explanation. In Chapter 4, "Information based Trading in Index Options and Futures", joint work with Seung Won Woo, we study intraday information based trading. The trade imbalances of index options with the largest leverage contain better information content on intraday KOSPI 200 return movements compared to that of options with smaller implicit leverage. We find that domestic brokerage proprietary traders are better informed on KOSPI 200 intraday returns among investor groups. However, we show that the futures trade imbalances of foreigners contain superior information content in predicting KOSPI 200 intraday return movements during the recent subprime mortgage crisis in 2008. This indicates that foreign traders may possess better information processing skills on news that originates from outside of Korea.
Download or read book Three essays on empirical finance written by Tse-Chun Lin and published by Rozenberg Publishers. This book was released on 2009 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Why an Asset Pricing Model Fails to Explain the Cross Section of Stock Returns in the Korean Market written by Joon Chae and published by . This book was released on 2017 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the reason that none of asset pricing models show substantial performance in the Korean market. Based upon previous literature, the main reasons for the failure are categorized into three: transaction costs, investors' irrationality, and missing risk factors. We analyze the difference between the expected return from an asset pricing model and the realized return with respect to three possible reasons for the failure of asset pricing models. By regressing the difference between the expected return and the realized return on proxies of transaction costs, investors' irrationality, and missing risk factors, we find that transaction costs and investors' irrationality are tenaciously disrupting the performance of asset pricing models. We also show that the inferior performance of an asset pricing model from transaction costs and investors' irrationality cannot be improved by just adding more factors in an asset pricing model.
Download or read book American Doctoral Dissertations written by and published by . This book was released on 2002 with total page 776 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Three Essays on Statistical Inference for Stock Return Predictions and Capital Asset Pricing Models written by Sungju Chun and published by . This book was released on 2012 with total page 270 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: In this dissertation, I focus on econometric issues arising in the fields of Financial Economics. In the first chapter, I study return predictability in international equity markets focusing on the effects of the bias and spurious regression problems for statistical inference. The slope coefficient estimator in predictive regressions for stock returns is biased in the presence of a lagged stochastic regressor. Spurious regression may also occur if the underlying expected return is highly persistent. I consider the effect of these biases in the presence of data mining for the predictive variables. I find that the two biases can reinforce or offset each other, depending on the parameters of the model. I present a new bias expression valid with an unobserved true expected returns and re-evaluate return predictability in international equity markets adjusting for data mining associated with both effects. The second chapter studies tests for structural changes in the trend function of a univariate time series that are robust to whether the noise component is stationary (I (0)) or contains an autoregressive unit root (I (1)). The tests of interest are the robust procedures recently proposed by Perron and Yabu (2009) and Harvey, Leybourne and Taylor (2009), both of which attain the same limit distribution under I (0) and I (1) errors. We compare their finite sample size and power under different data-generating processes for the noise components. We apply the tests to a large historical panel of real exchange rates with respect to the U.S. dollar for 19 countries and document simultaneous shifts in level and trend for many series. The third chapter studies the sampling interval effect in estimating capital asset pricing models. In past empirical studies, the beta coefficient estimates are documented to be sensitive to the sampling interval used for returns. We provide a theoretical framework to explain this sampling interval effect. We show that it can be attributable to the existence of transitory components in stock prices, and provide empirical evidence supporting its presence.
Download or read book Essays on Estimating and Testing Asset Pricing Models written by and published by . This book was released on 2009 with total page 275 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Three Essays on Empirical Asset Pricing written by Rui Zhao and published by . This book was released on 2007 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation contains three chapters.
Download or read book Three Essays on Asset Pricing Theory written by Jaeho Cho and published by . This book was released on 1989 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Three Essays in Empirical Asset Pricing written by Shanshan Qu and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
