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Sentiment and uncertainty
Birru, Justin; Young, Trevor - 2020
Sentiment should exhibit its strongest effects on asset prices at times when valuations are most subjective. Consistent with this hypothesis, we show that a one-standard-deviation increase in aggregate uncertainty amplifies the predictive ability of sentiment for market returns by two to four...
Persistent link: https://www.econbiz.de/10012216707
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Understanding Momentum and Reversals
Kelly, Bryan T. - 2020
Stock momentum, long-term reversal, and other past return characteristics that predict future returns also predict … significantly over time, even at short horizons over which the momentum phenomenon operates (one year), and that this variation … conditional risk exposure can ex- plain a sizeable fraction of momentum and long-term reversal returns and can be used to generate …
Persistent link: https://www.econbiz.de/10012832984
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From Which Consumption-Based Asset Pricing Models Can Investors Profit? Evidence from Model-Based Priors
Kruttli, Mathias S. - 2020
This paper analyzes whether consumption-based asset pricing models improve the equity premium forecasts of a hypothetical investor with access to these models from 1947 onwards. The investor imposes economic constraints derived from asset pricing models as model-based priors on predictive...
Persistent link: https://www.econbiz.de/10012856784
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Asset Pricing Model Estimation Errors During Rational and Irrational Investor Behavior Periods
Marsh, Michael G. - 2020
This paper examines the prediction that human behavior changes the outcome of market predictability, indicated by a difference in asset pricing model estimated prediction error, calculated using the Sharpe ratio, Jensen's alpha, and the Treynor measure for publicly traded firms in the consumer...
Persistent link: https://www.econbiz.de/10012847530
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Disentangling anomalies : risk versus mispricing
Birru, Justin; Mohrschladt, Hannes; Young, Trevor - 2020
Systematic mispricing primarily affects speculative stocks and predominantly results in overpricing, predicting lower average returns. Because speculative stocks overlap with stocks deemed risky by rational models, failing to control for exposure to systematic mispricing can bias tests of...
Persistent link: https://www.econbiz.de/10012388392
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A Security Market Plane Approach to Stock Selection
Ferguson, Robert - 2018
Because dividends are taxed at a higher rate than capital gains, as stock with a higher yields should have a higher expected return than a stock whose return is expected to result mostly from price appreciation. Adding yield to the traditional Security Market Line results in a "market plane"...
Persistent link: https://www.econbiz.de/10012928355
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Re-Evaluating the Value of Modern Portfolio Theory and Asset Pricing Models Based on Behavioral Insights from Benjamin Graham's Value Investing Paradigm
Otuteye, Eben - 2017
in both academic and professional curricula. In spite of their long history and reputation, the CAPM and its extensions …
Persistent link: https://www.econbiz.de/10012954957
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A Critique of Modern Portfolio Theory and Asset Pricing Models Based on Behavioral Insights from Benjamin Graham's Value Investing Paradigm
Otuteye, Eben - 2017
concepts in both academic and professional curricula. In spite of their long history and reputation, the CAPM and its …
Persistent link: https://www.econbiz.de/10012948474
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A Concave Security Market Line
De Giorgi, Enrico - 2018
We provide theoretical and empirical arguments in favor of a diminishing marginal premium for market risk. In capital market equilibrium with binding portfolio restrictions, investors with different risk aversion levels generally hold different sets of risky securities. Whereas the traditional...
Persistent link: https://www.econbiz.de/10012940481
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Asset Prices and Wealth Dynamics in a Financial Market with Endogenous Liquidation Risk
Dindo, Pietro - 2018
aggressive traders dominate, as well as conditions under which the size of the liquidation risk is endogenously determined …
Persistent link: https://www.econbiz.de/10012930535