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Squeezing shorts through social news platforms

Allen, Franklin; Nowak, Eric; Pirovano, Matteo; … - 2021 - This draft: April 12, 2021

At the end of January 2021, a group of stocks listed on US stock exchanges experienced sudden surges in their stock prices, which - coupled with high short interest – led to brief short squeeze episodes. We argue that these short squeezes were the result of coordinated trading by retail...

Persistent link: https://www.econbiz.de/10012502167

Market efficiency and limits to arbitrage : evidence from the Volkswagen short squeeze

Allen, Franklin; Haas, Marlene; Nowak, Eric; Tengulov, Angel - 2018

On October 26, 2008, Porsche announced a largely unexpected domination plan for Volkswagen. The resulting short squeeze in Volkswagen's stock briefly made it the most valuable listed company in the world. We argue that this was a manipulation designed to save Porsche from insolvency and the...

Persistent link: https://www.econbiz.de/10011875647

An Asset Pricing Theory of Volatility Tail Behavior

Bakshi, Gurdip - 2012

We contrast two different asset pricing models, where the pricing kernel either (i) increases in the volatility dimension, reflecting investors' aversion to volatility, or (ii) could be non-monotonic in volatility, reflecting heterogeneity in investors' beliefs. The two models yield opposite...

Persistent link: https://www.econbiz.de/10013115088

Tax Risk and Asset Prices : Evidence from Dual-class Corporate Bonds in the Early 19th Century

Fleckenstein, Matthias - 2019

This paper exploits a natural experiment from the late 1800s in which many U.S. firms had inadvertently issued both taxable and tax-exempt bonds. Investors paid income tax on taxable bonds, but firms covered income tax on investors' behalf on tax-exempt bonds. Using a unique data-set of these...

Persistent link: https://www.econbiz.de/10012889394

The Pricing of Market Jumps in the Cross-Section of Stocks and Options

Babaoglu, Kadir - 2018

Market index and individual stock returns exhibit jumps in addition to normal shocks. Equities have exposure to the market and sensitivity to the market is important for explaining equity returns and option prices. I develop a new factor model that explores (i) if a separate beta for market...

Persistent link: https://www.econbiz.de/10012936701

Returns of Claims on the Upside and the Viability of U-Shaped Pricing Kernels

Bakshi, Gurdip - 2018

When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...

Persistent link: https://www.econbiz.de/10012940716

The Pricing Kernel Is U-shaped

Sichert, Tobias - 2020

Numerous studies find S-shaped pricing kernels, which is conflicting with standard theory. In contrast to that, based on a novel GARCH model with structural breaks, I show that the pricing kernel is consistently U-shaped. The results are robust to variations in the methodology and hold for...

Persistent link: https://www.econbiz.de/10012853175

Factor Glut in Asset Pricing through a Modern Optimization Lens

Bakshi, Gurdip; Christensen, Timothy; Crosby, John; … - 2023

This paper addresses questions regarding the dimensionality of the stochastic discount factor and the selection of the best factors that enter it. We analyze these questions theoretically and empirically with a novel methodology which performs both (i) estimation of factor loadings and (ii) best...

Persistent link: https://www.econbiz.de/10014350213

Latency and Asset Prices

Kirilenko, Andrei A. - 2015

We measure message processing time or latency inside an automated trading platform. We show that latency is a random variable that has a strong predictive power over both volatility and the volatility of volatility of a highly liquid asset over and above changes in message traffic. We argue that...

Persistent link: https://www.econbiz.de/10013030845

Arbitraging Mispriced Assets with Separation Portfolios to Lessen Total Risk

Apreda, Rodolfo - 2009

This paper expands on a procedure to arbitrage mispriced assets against the benchmark provided by the Security Market … least total risk among other alternative portfolios. Coming next, such arbitrage is dealt directly with one single … separation portfolio, which grants that the total risk linked with the arbitrage portfolio equals the non-systematic risk …

Persistent link: https://www.econbiz.de/10013159871

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