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Does beta move with news?: Systematic risk and firm-specific information flows

Patton, Andrew J.; Verardo, Michela - London School of Economics (LSE) - 2009

This paper shows that the systematic risk (or "beta") of individual stocks increases by an economically and statistically signi…cant amount on days of firm-specific news announcements, and reverts to its average level two to five days later. We employ intra-daily data and recent advances in...

Persistent link: https://www.econbiz.de/10011071113

Debt maturity and the liquidity of secondary debt markets

Bruche, Max; Segura, Anatoli - London School of Economics (LSE) - 2013

debt markets, and an over-the-counter secondary debt market with search frictions. Liquidity in this market is related to …

Persistent link: https://www.econbiz.de/10010746682

Anticipated and repeated shocks in liquid markets

Lou, Dong - London School of Economics (LSE) - 2011

We show that Treasury security prices in the secondary market decrease significantly before subsequent auctions and recover shortly after. This price pattern implies a large issuance cost for the Treasury Department, which is estimated to be between 9 and 18 basis points of the auction size. For...

Persistent link: https://www.econbiz.de/10010746704

Information asymmetries, volatility, liquidity, and the Tobin Tax

Danilova, Albina; Julliard, Christian - London School of Economics (LSE) - 2014

sampling frequency of the data; iii) volatility, the limit order book, and liquidity, in terms of tightness, depth, and … empirical evidence about stock market volatility, liquidity, limit order books, and market frictions, and provides a natural … if news are not generated by a stochastic volatility process, in the presence of information treatment and/or order …

Persistent link: https://www.econbiz.de/10011170092

Estimating semiparametric ARCH (8) models by kernel smoothing methods

Linton, Oliver; Mammen, Enno - London School of Economics (LSE) - 2003

We investigate a class of semiparametric ARCH(∞) models that includes as a special case the partially nonparametric (PNP) model introduced by Engle and Ng (1993) and which allows for both flexible dynamics and flexible function form with regard to the 'news impact' function. We propose an...

Persistent link: https://www.econbiz.de/10011071447

Rational trader risk

Kondor, Peter - London School of Economics (LSE) - 2004

Allowing for a richer information structure than usual, we show that rational traders’ calculation with short-term price fluctuations may heavily influence their behaviour even if the interim price is not influenced by non-rational agents i.e. there is no noise trader risk. Instead, traders...

Persistent link: https://www.econbiz.de/10010884635

Semiparametric estimation of a characteristic-based factor model of common stock returns

Connor, Gregory; Linton, Oliver - London School of Economics (LSE) - 2006

We introduce an alternative version of the Fama-French three-factor model of stock returns together with a new estimation methodology. We assume that the factor betas in the model are smooth nonlinear functions of observed security characteristics. We develop an estimation procedure that...

Persistent link: https://www.econbiz.de/10010884698

The lifecycle of the financial sector and other speculative industries

Biais, Bruno; Rochet, Jean-Charles; Woolley, Paul - London School of Economics (LSE) - 2009

Speculative industries exploit novel technologies subject to two risks. First, there is uncertainty about the fundamental value of the innovation: is it strong or fragile? Second, it is difficult to monitor managers, which creates moral hazard. Because of moral hazard, managers earn agency rents...

Persistent link: https://www.econbiz.de/10010744809

Endogenous state prices, liquidity, default, and the yield curve

Espinoza, Raphael A.; Goodhart, Charles; Tsomocos, … - London School of Economics (LSE) - 2007

We show, in an exchange economy with default, liquidity constraints and no aggregate uncertainty, that state prices in … a complete markets general equilibrium are a function of the supply of liquidity by the Central Bank. Our model is … liquidity. The upshot of our argument is that agents’ expectations computed using risk-neutral probabilities give more weight in …

Persistent link: https://www.econbiz.de/10010745061

Portfolio choice beyond the traditional approach

Penaranda, Francisco - London School of Economics (LSE) - 2007

This paper surveys asset allocation methods that extend the traditional approach. An important feature of the traditional approach is that measures the risk and return tradeoff in terms of mean and variance of final wealth. However, there are also other important features that are not always...

Persistent link: https://www.econbiz.de/10010745189

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