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Where do Betas Come From? Asset Price Dynamics and the Sources of Systematic Risk

Campbell, John - 1993

This paper breaks assets' betas with common factors into components attributable to news about future cash flows, real interest rates, and excess returns. To achieve this decomposition the paper uses a vector autoregressive time-series model and an approximate log-linear present value relation....

Persistent link: https://www.econbiz.de/10012474630

Forward Return Expectations

Gandhi, Mihir; Gormsen, Niels; Lazarus, Eben - National Bureau of Economic Research - 2023

We measure investors' short- and long-term stock-return expectations using both options and survey data. These expectations at different horizons reveal what investors think their own short-term expectations will be in the future, or forward return expectations. While contemporaneous short-term...

Persistent link: https://www.econbiz.de/10014372444

How and When are High-Frequency Stock Returns Predictable?

Aït-Sahalia, Yacine; Fan, Jianqing; Xue, Lirong; Zhou, … - National Bureau of Economic Research - 2022

This paper studies the predictability of ultra high-frequency stock returns and durations to relevant price, volume and transactions events, using machine learning methods. We find that, contrary to low frequency and long horizon returns, where predictability is rare and inconsistent,...

Persistent link: https://www.econbiz.de/10013362020

Procyclical Stocks Earn Higher Returns

Goetzmann, William N.; Watanabe, Akiko; Watanabe, Masahiro - National Bureau of Economic Research - 2024

loading on the expected real GDP growth rate is a priced risk measure. A fully tradable, ex-ante portfolio formed on this …

Persistent link: https://www.econbiz.de/10014544787

The Risk Anomaly Tradeoff of Leverage

Baker, Malcolm - 2016

Higher-beta and higher-volatility equities do not earn commensurately higher returns, a pattern known as the risk … anomaly. In this paper, we consider the possibility that the risk anomaly represents mispricing and develop its implications … for corporate leverage. The risk anomaly generates a simple tradeoff theory: At zero leverage, the overall cost of capital …

Persistent link: https://www.econbiz.de/10012456558

Cross-Sectional Dispersion of Risk in Trading Time

Andersen, Torben - 2019

priced risk …

Persistent link: https://www.econbiz.de/10012480274

Artificial Intelligence Asset Pricing Models

Kelly, Bryan T.; Kuznetsov, Boris; Malamud, Semyon; Xu, … - National Bureau of Economic Research - 2025

The core statistical technology in artificial intelligence is the large-scale transformer network. We propose a new asset pricing model that implants a transformer in the stochastic discount factor. This structure leverages conditional pricing information via cross-asset information sharing and...

Persistent link: https://www.econbiz.de/10015194996

Financial Machine Learning

Kelly, Bryan T.; Xiu, Dacheng - National Bureau of Economic Research - 2023

We survey the nascent literature on machine learning in the study of financial markets. We highlight the best examples of what this line of research has to offer and recommend promising directions for future research. This survey is designed for both financial economists interested in grasping...

Persistent link: https://www.econbiz.de/10014322889

Complexity in Factor Pricing Models

Didisheim, Antoine; Ke, Shikun; Kelly, Bryan T.; … - National Bureau of Economic Research - 2023

We theoretically characterize the behavior of machine learning asset pricing models. We prove that expected out-of-sample model performance--in terms of SDF Sharpe ratio and test asset pricing errors--is improving in model parameterization (or "complexity"). Our empirical findings verify the...

Persistent link: https://www.econbiz.de/10014372446

Risk Preferences Implied by Synthetic Options

Dew-Becker, Ian; Giglio, Stefano - National Bureau of Economic Research - 2023

demanding a premium for hedging risk. This paper examines the consistency of those explanations with returns on dynamically … options to also have negative excess returns. Empirically, synthetic options have CAPM alphas near zero over the period 1926 … on synthetic options -- with the variance risk premium shrinking towards zero -- while various drivers of the cost and …

Persistent link: https://www.econbiz.de/10014436964