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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
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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
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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
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Information Shocks and the Cross-section of Expected Returns
Savaser, Tanseli; Tiniç, Murat - 2022
This paper examines the risk premium associated with the information shocks in equity markets. For all stocks traded in Borsa Istanbul between March 2005 and December 2020, we calculate information shocks as the unanticipated information asymmetry by focusing on the changes in the proportion of...
Persistent link: https://www.econbiz.de/10013404748
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Identifying Expectation Errors in Value/Glamour Strategies : A Fundamental Analysis Approach
Piotroski, Joseph D. - 2013
It is well established that value stocks outperform glamour stocks, yet considerable debate exists about whether the return differential reflects compensation for risk or mispricing. Under mispricing explanations, prices of glamour (value) firms reflect systematically optimistic (pessimistic)...
Persistent link: https://www.econbiz.de/10013093880
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Expected Returns and Large Language Models
Jiang, Jingwen; Kelly, Bryan T.; Xiu, Dacheng - 2023
We extract contextualized representations of news text to predict returns using the state-of-the-art large language models in natural language processing. Unlike the traditional bag-of-words approach, the contextualized representation captures both the syntax and semantics of text, thus...
Persistent link: https://www.econbiz.de/10014351081
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Adaptive Economic Beliefs : An Equity Premium Puzzle Solution
Vanoverberghe, Didier - 2011
The Equity risk-premium and volatility puzzles: Is it possible to have a high-equity premium and a low risk-free rate, and a high volatile stock return, have received a great deal of attention but beyond this, the fundamental issues are the following: What are the economic representations that...
Persistent link: https://www.econbiz.de/10013123331
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Testing for Monotonicity in Expected Asset Returns
Romano, Joseph P. - 2013
Many postulated relations in finance imply that expected asset returns strictly increase in an underlying characteristic. To examine the validity of such a claim, one needs to take the entire range of the characteristic into account, as is done in the recent proposal of Patton and Timmermann...
Persistent link: https://www.econbiz.de/10013092850
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Equilibrium Relationship between Expected Return and Skewness
Bhattacharyya, Nalinaksha - 2015
equilibrium relationship empirically with stocks listed on the NYSE from 2002 to 2007 and find that our results support our theory …
Persistent link: https://www.econbiz.de/10013015046
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Asset Pricing in Production Economies with Extrapolative Expectations
Hirshleifer, David A. - 2015
Introducing extrapolative bias into a standard production-based model with recursive preferences reconciles salient stylized facts about business cycles (low consumption volatility, high investment volatility relative to output) and financial markets (high equity premium, volatile stock returns,...
Persistent link: https://www.econbiz.de/10013038191