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Risk-Neutral Cumulants, Expected Risk Premia, and Future Stock Returns

Wang, Kai - 2018

This paper builds an empirical model to connect option-implied cumulants with expected risk premia through latent risk factors. Expected risk premia on individual stocks are estimated by applying a new partial least squares-based method on risk-neutral cumulants at different orders and various...

Persistent link: https://www.econbiz.de/10012908081

Expected Equity Returns Should Correlate with Idiosyncratic Risk

Bruno, Giovanni - 2018

law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries … implications of the theory. Time variation in asset ivol causes time variation in the option value of equity that translates into …

Persistent link: https://www.econbiz.de/10012910108

Return and Dividend Expectations in the Cross-Section of Prices

Douglas, Reed - 2022

I build a price-ratio model based on the Campbell and Shiller (1988) decomposition to test which components of investor expectations best explains cross-sectional price differences. I evaluate the in- and out-of-sample performance of my model, which uses a higher-order expansion with an added...

Persistent link: https://www.econbiz.de/10014236440

How Much Stock Return Predictability Can We Expect From an Asset Pricing Model?

Zhou, Guofu - 2010

Stock market predictability is of considerable interest in both academic research and investment practice. Ross (2005) provides a simple and elegant upper bound on the predictive regression R-squared that R^2 = (1 R_f)^2 Var(m) for a given asset pricing model with kernel m, where R_f is the...

Persistent link: https://www.econbiz.de/10013150862

Home Bias and Expected Returns : A Structural Approach

Wallmeier, Martin; Iseli, Christoph - 2022

We study the effect of the home bias on international asset pricing by extending the core-satellite approach of active asset allocation to an equilibrium analysis. In this framework, investors combine a common core portfolio with an active investment in their home asset. In equilibrium, the core...

Persistent link: https://www.econbiz.de/10013405489

Price, Cultural Dimensions, and the Cross-Section of Expected Stock Returns

Hammerich, Ulrich - 2019

We document a nominal stock price effect that is (like momentum) associated with (national) culture. Using the full spectrum of cultural dimensions proposed by Hofstede et al. and the cross-section of stock returns of 41 countries, we not only show a robust predictive and explanatory power of...

Persistent link: https://www.econbiz.de/10012861754

Expected idiosyncratic entropy

Baghdadabad, Mohammadreza Tavakoli - In: China Accounting and Finance Review 26 (2024) 2, pp. 137-169

Purpose - We propose a risk factor for idiosyncratic entropy and explore the relationship between this factor and expected stock returns. Design/methodology/approach - We estimate a cross-sectional model of expected entropy that uses several common risk factors to predict idiosyncratic entropy....

Persistent link: https://www.econbiz.de/10014554136

The Relation Between Expected Returns, Realized Returns, and Firm Risk Characteristics

Botosan, Christine; Plumlee, Marlene; Wen, He Jennifer - 2015

Existing literature employs two approaches to assess the validity of alternative proxies for firm-specific cost of equity capital. One approach relies on the theoretical link between future realized returns and cost of equity capital, while the second approach relies on the theoretical link...

Persistent link: https://www.econbiz.de/10014183453

Network Risk and Cross-Section of Expected Stock Returns

Chen, Yi-An - 2015

Current empirical asset pricing research on idiosyncratic volatility (IVOL), negatively related to cross-sectional expected returns, fails to take explicit account of risk that results from a shock to a network of economically related stocks. These stocks move together, and are therefore...

Persistent link: https://www.econbiz.de/10013027208

Expectations, Fundamentals, and Asset Returns : Evidence from the Commodity Markets

Beber, Alessandro - 2016

We study the links between expectations, fundamentals, and asset returns using the rich empirical setup offered by commodity markets. We find that survey-based expectations predict future fundamentals, but are not significant predictors of future returns. Expectations of returns are correlated...

Persistent link: https://www.econbiz.de/10012988158