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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

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

Execution Risk and Arbitrage Opportunities in the Foreign Exchange Markets

Ito, Takatoshi - 2020

With the high-frequency data of firm quotes in the transaction platform of foreign exchanges, arbitrage profit … pairs--can be detected to emerge and disappear in the matter of seconds. The frequency and duration of such arbitrage … arbitrage opportunity and places orders for multiple transactions--two in negative spreads and three in triangular arbitrage …

Persistent link: https://www.econbiz.de/10012479230

Data-Snooping Biases in Tests of Financial Asset Pricing Models

Lo, Andrew W. - 1989

We investigate the extent to which tests of financial asset pricing models may be biased by using properties of the data to construct the test statistics. Specifically, we focus on tests using returns to portfolios of common stock where portfolios are constructed by sorting on some empirically...

Persistent link: https://www.econbiz.de/10012476047

Analyst Bias and Mispricing

Grinblatt, Mark; Jostova, Gergana; Philipov, Alexander - National Bureau of Economic Research - 2023

Cross-sectional forecasts of conservative and optimistic biases in analyst earnings estimates predict a stock's future returns, especially for firms that are hard to value. Trading strategies--whether based on the component of analyst bias that is correlated with major return anomalies or the...

Persistent link: https://www.econbiz.de/10014248012

A Quantity-Based Approach to Constructing Climate Risk Hedge Portfolios

Alekseev, Georgij; Giglio, Stefano; Maingi, Quinn; … - National Bureau of Economic Research - 2022

We propose a new methodology to build portfolios that hedge the economic and financial risks from climate change. Our quantity-based approach exploits information on how mutual fund managers trade in response to idiosyncratic changes in their climate risk beliefs. We exploit two types of...

Persistent link: https://www.econbiz.de/10013477195

Monetary-Based Asset Pricing : A Mixed-Frequency Structural Approach

Bianchi, Francesco; Ludvigson, Sydney C.; Ma, Sai - National Bureau of Economic Research - 2022

We integrate a high-frequency monetary event study into a mixed-frequency macro-finance model and structural estimation. The model and estimation allow for jumps at Fed announcements in investor beliefs, providing granular detail on why markets react to central bank communications. We find that...

Persistent link: https://www.econbiz.de/10013210100

RIM-Based Value Premium and Factor Pricing Using Value-Price Divergence

Cong, Lin William; George, Nathan Darden; Wang, Guojun - National Bureau of Economic Research - 2023

We document that value-to-price, the ratio of Residual-Income-Model-based valuation to market price, subsumes the power of book-to-market ratio and many other value or quality measures in predicting stock returns. Long-short value-to-price portfolios hedge against momentum, revitalize the...

Persistent link: https://www.econbiz.de/10014226164

Asset Pricing with Optimal Under-Diversification

Elenev, Vadim; Landvoigt, Tim - National Bureau of Economic Research - 2023

We study sources and implications of undiversified portfolios in a production-based asset pricing model with financial frictions. Households take concentrated positions in a single firm exposed to idiosyncratic shocks because managerial effort requires equity stakes, and because investors gain...

Persistent link: https://www.econbiz.de/10014250139

Asset Pricing with Panel Tree Under Global Split Criteria

Cong, Lin William; Feng, Guanhao; He, Jingyu; He, Xin - National Bureau of Economic Research - 2022

We develop a new class of tree-based models (P-Tree) for analyzing (unbalanced) panel data utilizing global (instead of local) split criteria that incorporate economic guidance to guard against overfitting while preserving interpretability. We grow a P-Tree top-down to split the cross section of...

Persistent link: https://www.econbiz.de/10013477297

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