Showing 1 - 10 of 2,065
I develop and test a model to study the interaction between the commodity and stock markets. This study attempts to clarify the debate about the effect of financialization on commodity markets. Theoretically, the futures risk premium is determined by hedging pressure, stock market returns, and...
Persistent link: https://www.econbiz.de/10012851801
We zero in on the expected returns of long-short portfolios based on 120 stock market anomalies by accounting for (1) effective bid-ask spreads, (2) post-publication effects, and (3) the modern era of trading technology that began in the early 2000s. Net of these effects, the average anomaly's...
Persistent link: https://www.econbiz.de/10012853428
Leveraged exchange-traded funds (LETFs) that allow investors to over-proportionally participate in abstract markets, such as indices, are studied in this paper. LETFs are found to suffer from a performance lag (negative alpha). The lag is categorized in three ways: fund management fees,...
Persistent link: https://www.econbiz.de/10012828722
Recent evidence indicates the value premium declined over time. In this paper, we argue this decline happened because book equity, BE, is no longer a good proxy for fundamental equity, FE, defined as the equity value originating purely from expected cash flows (i.e., no discount rate differences...
Persistent link: https://www.econbiz.de/10012837291
Using hand-collected data of commodity futures contracts going back to 1877, we replicate in the pre-sample history the well-documented cross-sectional commodity factor premia of momentum, value and basis. All three premia remain significantly positive in the additional 80-plus years of...
Persistent link: https://www.econbiz.de/10012892589
During the global financial crisis, stressed market conditions led to skyrocketing corporate bond spreads that could not be explained by conventional modeling approaches. This paper builds on this observation and sheds light on time-variations in the relationship between systematic risk factors...
Persistent link: https://www.econbiz.de/10012898459
Current factor models do not identify risks that matter to investors. To address this issue, we provide a factor model implementation of the ICAPM, which captures market risk and intertemporal risk (i.e., changes in long-term expected returns and volatility). We build our intertemporal risk...
Persistent link: https://www.econbiz.de/10012824154
Term premiums, defined as the excess return of long-dated contracts over short-dated contracts, in commodity futures are strongly predictable, both in the time series and in the cross section, by roll yield spreads. Strategies that exploit this predictability show sizable Sharpe ratios and are...
Persistent link: https://www.econbiz.de/10012959999
Rational asset pricing models should hold across assets. Nevertheless, in practice they are often developed and tested on a single asset pricing anomaly. This approach can lead to an overabundance of idiosyncratic ‘rational' explanations. The paper demonstrates the problem by showing that...
Persistent link: https://www.econbiz.de/10012934502
While existing asset pricing studies focus on macroeconomic variables to predict stock market risk premium, we find that an aggregate index of corporate activities has substantially greater predictive power both in- and out-of sample, and yields much greater economic gain for a mean-variance...
Persistent link: https://www.econbiz.de/10012934744