Download or read book Essays on International Asset Pricing Cultural Finance and the Price Effect written by Ulrich Johannes Hammerich and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is not only a pioneer work in the new finance sphere cultural finance, but also a feat of fundamental research in international empirical asset pricing. I present significant evidence that the most basic stock characteristic, the nominal price, is consequential for stock returns (and associated with higher statistical moments) in a comprehensive cross-country dataset comprising 41 countries and a culture-dependent capital market anomaly (as it was already shown e.g. for the momentum effect). For the case of Germany, I additionally provide an in-depth analysis of the price effect (i.e. a high/low price of an asset goes hand in hand with high/low subsequent returns) as this country offers a unique possibility to investigate the evolution and trigger of this genuinely price-based capital market anomaly due to a rapid and dramatic countrywide dispersion of stock prices in the aftermath of law amendments. Furthermore, I find the explanatory power of risk factor mimicking hedge portfolios (especially RMRF, HML, and WML, i.e. the beta, value, and momentum factors), which are consistently implemented in empirical asset pricing models (like the FF 3-, 5-, and 6-factor models and the Carhart 4-factor model), as well as their effectiveness as investment styles to vary across cultures. That is, the spectrum of this dissertation strikes both implications of the weak EMH that time series data (like the price) should have no informational value for future returns and assumptions of theoretical asset pricing models that (only) systematic risk (CAPM), future investment opportunities (ICAPM) or consumption risk (CCAPM) drives asset returns (universally). Finally, yet importantly, I find evidence that even cultural characteristics in itself (measured via the cultural dimensions of Hofstede and others) have explanatory and predictive power for global, cross-sectional stock returns as well as characteristics-based (hedge) portfolio returns. By virtue of these contributions to pertinent financial research, this dissertation is an empirical primer for possible future fields of research culture-based/culture-neutral asset pricing, asset management, and asset allocation.

Download or read book Essays in Asset Pricing written by Man Li and published by . This book was released on 2011 with total page 382 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis undertakes empirical and theoretical research in asset pricing in both US and Global financial markets, with a particular focus on the financial impact of socially responsible investment (SRI) and implementation of the ICAPM and CCAPM frameworks in the US market. We aim to provide a comprehensive analysis of the financial impact of SRI on the US and Global equity markets and to resolve issues relating to the CCAPM that remain in the asset pricing literature. Prior studies that examine the financial impact of SRI produce mixed findings. Therefore, we begin by reviewing the relevant international literature and stress the importance of selecting appropriate SRI proxies in asset pricing tests. We enrich the literature by identifying areas that need to be carefully considered in constructing an SRI proxy and this will shed new light on the question of what measure of SRI should be used. In the first empirical chapter, we examine the financial impact of SRI on global equity returns, assessing our SRI proxies in the context of standard asset pricing models. We find that SRI has no significant impact on the global equity market. However, since SRI has become an increasingly popular practice only recently, our results may be hampered by data constraints. This motivates the next stage of the analysis wherein we employ the ICAPM framework. In Chapter 3, we formulate a two-factor empirical model under the ICAPM framework and construct SRI proxies by using the economic tracking portfolio method of Lamont (2001) to further examine whether SRI has financial impacts on the US equity market. Our findings in Chapter 3 are consistent with those of Chapter 2. The combined import of our findings in both chapters suggests that investors are free to implement SRI mandates without fear of breaching their fiduciary duties from inferior performance due to incorporating an SRI process. This will encourage the adoption of socially responsible investment strategies in practice. In the final chapter, we examine the empirical validity of the CCAPM that assumes investor's utility is non-separable across states of nature. To our knowledge, it is the first to evaluate the cross-sectional implications of the recursive utility function of Epstein and Zin (1991) by using innovations in consumption growth. Based on these analyses, we conclude that a variable capturing innovations in consumption growth is significantly priced in asset returns.

Download or read book Essays on International Asset Pricing in Partially Segmented Markets written by Sundaram Janakiramanan and published by . This book was released on 1986 with total page 356 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Empirical Asset Pricing in International Equity Markets written by Birgit Charlotte Müller and published by Springer Gabler. This book was released on 2021-08-20 with total page 147 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this Open-Access-book three essays on empirical asset pricing in international equity markets are presented. Despite being of fundamental economic and scientific importance, international financial markets have remained considerably underresearched until today. In the first essay, the role of firm-specific characteristics is analyzed for the momentum effect to exist in international equity markets. The second essay investigates the validity, persistence, and robustness of the newly discovered capital share growth factor across international equity markets as proposed by Lettau et al. (2019) for the U.S. market. Lastly, the third and final essay studies stock market reactions of European vendor banks to distressed loan sale announcements.

Download or read book Essays on Behavioral Finance and Asset Pricing written by Chen Wang and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of four essays exploring how people form beliefs and make decisions in the financial markets and their implications for asset prices. Two common threads run through this dissertation: the persistence of key state variables and the less-than-fully-rational approach to economic decision-making.Chapter 1 studies how professional forecasts of interest rates across maturities respond to new information. I document that forecasts for short-term rates underreact to new information while forecasts for long-term rates overreact. I propose a new explanation based on "autocorrelation averaging,'' whereby, to limited cognitive processing capacity, forecasters' estimate of the autocorrelation of a given process is biased toward the average autocorrelation of all the processes they observe. Consistent with this view, I show that forecasters over-estimate the autocorrelation of the less persistent term premium component of interest rates and under-estimate the autocorrelation of the more persistent short rate component. A calibrated model quantitatively matches the documented pattern of misreaction. Finally, I explore the pattern's implication for asset prices by showing that an overreaction-motivated predictor, the realized forecast error for the 10-year Treasury yield, robustly predicts excess bond returns.Chapter 2, joint with Ye Li, generalizes an exponential-affine asset pricing model to show that the prices of dividend strips reveal the underlying state variables, and thus, strongly predict future market return and dividend growth. We derive and empirically show that expected dividend growth is non-persistent, under which condition the ratio of market price to short-term dividend price, "duration,'' reveals only expected returns information. Duration predicts annual market return with an out-of-sample of R2 19%, subsuming the price-dividend ratio's predictive power. After controlling for duration, the price-dividend ratio predicts dividend growth with an out-of-sample R2 of 30%. Our results hold outside the U.S. We find the expected return is countercyclical and responds forcefully to monetary policy shocks. As implied by the ICAPM, shocks to duration, the expected-return proxy, are priced in the cross-section.Chapter 3, joint with Cameron Peng, shows that mutual funds contribute to cross-sectional momentum and excess volatility through positive feedback trading. Stocks held by positive feedback funds exhibit much stronger momentum, almost doubling the returns from a simple momentum strategy. This ``enhanced'' momentum is robust to alternative positive feedback trading measures and cannot be explained by other stock characteristics, ex-post firm fundamentals, fund flows, or herding. Moreover, enhanced momentum is almost entirely reversed after one quarter, suggesting initial overshooting and subsequent reversal. We argue that the most likely explanation is the price pressure from positive feedback trading. Finally, we relate positive feedback trading to mutual fund performance and show that it can positively predict a fund's return from active management.Chapter 4, joint with Ye Li, presents an intrinsic form of uncertainty in asset management, which we call ``delegation uncertainty.'' Investors hire managers for their superior models of asset markets, but delegation outcome is uncertain precisely because the managers' model is unknown to investors. We model investors' delegation decisions as a trade-off between asset return uncertainty and delegation uncertainty. Our theory explains several puzzles on fund performances. It also delivers asset pricing implications supported by our empirical analysis: (1) because investors partially delegate and hedge against delegation uncertainty, CAPM alpha arises; (2) the cross-section dispersion of alpha increases in uncertainty; (3) managers bet on alpha, engaging in factor timing, but factors' alpha is immune to the rise of their arbitrage capital -- when investors delegate more, delegation hedging becomes stronger. Finally, we offer a novel approach to extract model uncertainty from asset returns, delegation, and survey expectations.

Download or read book Essays in Asset Pricing and International Finance written by Mary Tian and published by . This book was released on 2011 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three chapters in asset pricing and international finance. In Chapter 1, I examine the effect of tradability, the proportion of a firm's output that is exported, on its stock returns. The empirical patterns are consistent with the adjustment of the relative price of tradable to non-tradable goods, due to endowment shocks. I find firms that produce tradable goods have asset returns and earnings that are twice as cyclical as firms that produce non-tradable goods. A tradable minus nontradable portfolio of stock returns can predict changes in real exchange rates and the relative quantity of exports. A two-country endowment economy model formalizing the relative price mechanism is able to match the empirical facts. In Chapter 2, joint with Leonid Kogan and Roberto Rigobon, we take an openeconomy perspective on consumption growth predictability. We find that the combination of the U.S. and the world real interest rates predicts U.S. consumption growth. Predictability is highly significant, both statistically and economically, and is strongest at horizons of two to three years. The growth rate of consumption of services is more predictable than the growth rate of consumption of nondurable goods. We interpret this evidence using a two-country equilibrium exchange economy model and conclude that the predictive relation between interest rates and consumption growth is likely generated by output shocks in the non-tradable good sector. In Chapter 3, joint with Leonid Kogan, we examine the effects of data snooping on the performance of linear factor models at explaining asset pricing anomalies. We gather 22 anomalies established in the literature and create three-factor models from sorting firms into portfolios with respect to these anomalies. From 1950-2007, half of the factor models we construct can explain 31% or more of anomalies. In comparison, the CAPM and Fama French models rank in the 20th and 40th percentile of models respectively. Factors constructed from sorting by external financing characteristics (net stock issues and composite issuance) are able to explain a large proportion of anomalies. None of the models are able to explain momentum.

Download or read book Three Essays on International Asset Pricing written by Chu-Sheng Tai and published by . This book was released on 1999 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: Two dimensions that complicate finance in an international setting are market segmentation and foreign exchange risk. With the increasing globalization of financial markets, these two effects require that many issues such as investment analysis, risk management, asset pricing and capital budgeting confronting financial professionals have to rethink in an international context. My dissertation consists of three essays that intend to address the following questions: "Can time-varying risk premia explain the deviations from Uncovered Interest Parity (UIP)?", "Is foreign exchange risk priced in international financial markets?", and "Are emerging financial markets integrated with world markets?"

Download or read book Three Essays on Empirical Asset Pricing written by Amir Akbari and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "This thesis explores the role of borrowing frictions, exchange rate risk, and intertemporal demand in stock prices across international financial markets. Specifically, I study how global asset prices are governed, considering the constraints and incentives that investors face when making investment decisions. The first essay adds a new dimension to the research on the dynamics of global market integration, providing an explanation for reversals in market integration via funding illiquidity. I show that when funding capital dries out, investors, unable to borrow and trade freely, fail to facilitate the integration process. Therefore, international asset prices during these periods are explained more by country-specific asset pricing factors than by global asset pricing factors. The second essay explores the role of exchange rate risk and intertemporal demand in international markets. These sources of risk are linked via the interest rate channel and are both likely proxies of the state variables that affect asset prices over time. We carefully disentangle the two risk factors and study the international equity market indices with multiple risk factors in a large cross-section through time. We show that the evidence of global pricing of risk crucially hinges on pooling assets with substantial cross-sectional variation. The third essay introduces a methodological innovation to study the dynamics of the compensation for the intertemporal risk in business cycles. Specifically, we contribute to the empirical asset pricing literature by studying the relative importance of prices of intertemporal risk during recessions, recoveries, and expansions." --

Download or read book Essays on Asset Pricing Portfolio Choice and International Finance written by Maxime Sauzet and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation investigates a number of topics in international finance and macroeconomics, with a particular emphasis on using and adapting tools from asset pricing to this context. Chapter 1, co-authored with Pierre-Olivier Gourinchas and Helene Rey, starts by providing an overview of the structure of the international monetary and financial system. Chapter 2 zooms in on a specific and long-standing open issue that has received a lot of attention in the international finance literature: the international portfolio choice problem, which is concerned with how investors allocate their portfolio internationally. Despite this attention, the literature has only provided limited answers to this problem in terms of resolution methods and the generality of preferences, an issue that I aim to alleviate in this Chapter. Because of its generality, the framework of Chapter 2 lends itself to several applications and extensions. Chapter 3 focuses on one main application, in which I show that the model can reproduce a number of stylized facts about the structure and dynamics of the international financial system, and in particular the role of the United States, and of asset returns in this context. Finally, Chapter 4, co-authored with Pierre-Olivier Gourinchas and Helene Rey, focuses on the secular decline in global real interest rates, another key theme in international finance and macroeconomics. We suggest that the world real rate of interest is likely to remain low or negative for an extended period of time, and discuss a number of possible explanations, an important one being the process of deleveraging of the balance sheets of investors.

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 Essays on International Finance and Empirical Asset Pricing written by Matjaz Maletic and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on International Portfolio Choice and Asset Pricing Under Financial Contagion written by Zhenzhen Fan and published by . This book was released on 2017 with total page 145 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The 2008 financial crisis has witnessed prices of assets traded on different exchange markets, of various asset classes, from different geographical locations plunge simultaneously or in close succession, causing serious problems for banks, insurance companies, and other financial institutions. It calls for models that account for the unconventional dependence structure of asset prices beyond the classical paradigm. The class of mutually exciting jump-diffusion processes is a promising workhorse for modeling financial contagion in continuous-time finance. The class provides a parsimonious model of jump propagation, allowing for cross-sectional asymmetry and serial dependence through time: a jump that takes place in one asset market today leads to a higher probability of experiencing future jumps in the same market as well as in other markets around the world. This thesis tries to reconsider some of the classical problems in finance, most noticeably asset pricing, portfolio choice, hedging, and valuation, in the presence of contagion. We show that many investment and risk management implications and market efficiency conditions derived from classical models are no longer valid in the context of financial contagion."--Samenvatting auteur.

Download or read book Essays in International Finance and Asset Pricing written by Niall McGeever and published by . This book was released on 2017 with total page 165 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Asset Pricing and Behavioral Finance written by Huijing Li and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays. In the first essay, we develop a model to study the role of CSR costs in the cross-section of stock returns. Our CAPM-based model predicts CSR factors are priced in the cross-section of stock returns. We then empirically test the implication of our pricing model by using data from MSCI ESG. The univariate analysis reveals that the quantile portfolio with the lowest CSR (social or environmental) cost beta significantly outperforms the highest CSR cost beta portfolio. In addition, we find negative and significant risk premiums on both the environmental and social risk factor. The second essay reports the results of three experimental studies that investigate the impact of moral identity (MI) on individuals' financial decision-making. Study 1 suggests that individuals' MI is negatively related to the willingness to invest (WTI) in an immoral portfolio. Study 2 shows that individuals with a low MI have a higher WTI for an immoral portfolio only when they are incentivized by a higher financial return. Study 3 reveals that when immoral stocks provide a higher return incentive, individuals with low MI do have a higher WTI, but only when they perceive themselves to be distant from the immoral company. When individuals perceive themselves to be physically close to an immoral company, they are less sensitive to the return incentive and their WTI is lower. In the third essay, we study human capital from the perspective of ex ante health perception. We obtain search volume data of medical symptoms from Google Trends and follow the methodology of Da, Engelberg, and Gao, (2015). We propose that increased (decreased) search volume of medical symptoms implies an ex ante decline (increase) in the value of health oriented human capital. We then use the inverse of our health concern index to proxy the health dimension of human capital (denoted as HHC). We estimate stock exposure (beta) to the HHC, and a univariate analysis reveals the highest HHC beta portfolio significantly outperforms the lowest HHC beta portfolio. Also, our results suggest that the HHC is positively priced in the cross-section of stock returns.

Download or read book Essays on International Portfolio Diversification and Asset Prices written by Jun Sato and published by . This book was released on 1999 with total page 108 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on International Asset Pricing written by René Marcel Stulz and published by . This book was released on 1980 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Two Essays on Empirical Asset Pricing written by Yangqiulu Luo and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two essays on empirical asset pricing. The first essay examines if the idiosyncratic risk is priced. Theories such as Merton (1987) predict that idiosyncratic risk should be priced when investors do not diversify their portfolio. However, the previous literature has presented a mixed set of results of the pricing of idiosyncratic risk. We find strong evidence that idiosyncratic risk is priced differently across bull and bear markets. For the sample period from June 1946 to the end of 2010, a factor portfolio long on stocks with high idiosyncratic volatility and short on stocks with low idiosyncratic volatility yields an equal-weighted monthly return of 1.59% for bull markets but -1.29% for bear markets. These evidences support the hypothesis that investors are rewarded for betting on individual stocks during bull markets and holding more diversified portfolios during bear markets. The second essay examines the role of the limits to arbitrage in the negative effect of liquidity on subsequent stock returns. I hypothesize that if the negative effect persists because of the limits to arbitrage, the effect should be more pronounced when there are more severe limits to arbitrage. My empirical evidence supports the hypothesis. In addition, I find that the effect of the limits to arbitrage on the liquidity anomaly is not correlated to the liquidity risk.