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Systematic consumption risk in currency returns
Hoffmann, Mathias; Suter, Rahel - 2013
We sort currencies by countries' consumption growth over the past four quarters. Currency portfolios of countries experiencing consumption booms have higher Sharpe ratios than those of countries going through a consumption-based recession. A carry strategy that goes short in countries that are...
Persistent link: https://www.econbiz.de/10009752999
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Currency futures' risk premia and risk factors
Bernoth, Kerstin; Hagen, Jürgen von; Vries, Casper G. de - 2020
The use of futures exchange contracts instead of forwards completes the maturity spectrum of the correlation between the spot yield and the premium. We find that the forward premium puzzle (FFP) depends significantly on the maturity horizon of the futures contract and the choice of sampling...
Persistent link: https://www.econbiz.de/10012209529
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Implied Skewness and the Cross Section of Foreign Exchange Returns
Török, Ákos - 2022
The paper focuses on the relationship of the carry factor and option-implied skewness from a currency portfolio perspective. Although a connection between these two signals has been established in literature already, their interplay and simultaneous use in portfolio construction have not been...
Persistent link: https://www.econbiz.de/10013296972
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Macro-Based Factors for the Cross-Section of Currency Returns
Bybee, Leland; Gomes, Leandro; Valente, Joao Paulo - 2023
We use macroeconomic characteristics and exposures to Carry and Dollar as instruments to estimate a latent factor model with time-varying betas with the instrumented principal components analysis (IPCA) method by Kelly et al. (2020). On a pure out-of-sample basis, this model can explain up to...
Persistent link: https://www.econbiz.de/10014350654
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The Cross Section of Stock Returns in an Artificial Stock Market
van Cappelle, Tjeerd; Pokidin, Dmytro; Zwinkels, Remco C. J. - 2023
We develop an Artificial Stock Market - an agent-based simulation model of the stock market with many risky assets. The ASM has three layers of heterogeneous and interacting agents, and generates prices for 150 stocks. We present the current state of the model and demonstrate its ability to...
Persistent link: https://www.econbiz.de/10014254923
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CAPM and DCF : Does SML Relationship Gives Cost of Equity? – Ex-Ante Stock Returns are Not Same as Implied Discount Rates
Murugesan, Narayanaswamy - 2013
When Capital Asset pricing Model (CAPM) is considered as valid asset pricing theory, Security Market Line (SML) is … returns need not be same as implied discount rates even when CAPM is applicable and markets are efficient. This is because the … over the forecast period. The single period return of CAPM changes every year as the market changes with economic …
Persistent link: https://www.econbiz.de/10013081162
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Speculative Stock Price and Inadequacy of the Implied Cost of Capital as a Proxy for Expected Return
Fong, Robert - 2020
The implied cost of capital (ICC), the internal rate of return that equates speculative stock price to discounted expected future dividends, includes a mispricing-driven component in addition to expected return. The estimated relation of a mispricing-associated factor (X) with ICC is thus a...
Persistent link: https://www.econbiz.de/10012839261
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Leverage, Beta Estimation, and the Size Effect
Drobetz, Wolfgang - 2014
A measurement error in beta that arises from changes in leverage during the beta estimation window contributes in … beta estimation window rather than the average leverage during this window. Using the point-in-time beta to compute …
Persistent link: https://www.econbiz.de/10013049758
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Testing mispricing-augmented factor models in an emerging market : a quest for parsimony
Ali, Fahad - In: Borsa Istanbul Review 22 (2022) 2, pp. 272-284
This study is the first to test a financing-based misvaluation factor (UMO, undervalued-minus-overvalued), first proposed by Hirshleifer and Jiang (2010), for the Pakistani stock market. I find that the UMO factor, long underpriced (repurchase) stocks and short overpriced (new issue) stocks,...
Persistent link: https://www.econbiz.de/10013184079
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Do Five Asset Pricing Anomalies Share a Common Mispricing Factor? Multifaceted Empirical Analyses of Failure Risk Proxies, External Financing, and Stock Returns
Ogden, Joseph P. - 2010
Assuming that risk premiums are determined by failure risk, we present a stylized model of interactions among risk-proxy variables, external financing, and stock returns in which a common mispricing factor, involving operating profit and external financing, drives the following five asset...
Persistent link: https://www.econbiz.de/10013147129