Short- and Long-Horizon Behavioral Factors

2019 ◽  
Vol 33 (4) ◽  
pp. 1673-1736 ◽  
Author(s):  
Kent Daniel ◽  
David Hirshleifer ◽  
Lin Sun
Keyword(s):  
Cross Section ◽  
Factor Model ◽  
Behavioral Model ◽  
Equity Returns ◽  
Earnings Surprise ◽  
Oxford University ◽  
Investor Inattention ◽  
Two Factors ◽  
Short Horizon ◽  
Published Paper

Abstract We propose a theoretically motivated factor model based on investor psychology and assess its ability to explain the cross-section of U.S. equity returns. Our factor model augments the market factor with two factors that capture long- and short-horizon mispricing. The long-horizon factor exploits the information in managers’ decisions to issue or repurchase equity in response to persistent mispricing. The short-horizon earnings surprise factor, which is motivated by investor inattention and evidence of short-horizon underreaction, captures short-horizon anomalies. This 3-factor risk-and-behavioral model outperforms other proposed models in explaining a broad range of return anomalies. (JEL G12, G14) Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Contingent Capital Trigger Effects: Evidence from Liability Management Exercises

2019 ◽  
Vol 8 (2) ◽  
pp. 235-259 ◽  
Author(s):  
Boris Vallée
Keyword(s):  
Time Series ◽  
Cross Section ◽  
Web Site ◽  
Regulatory Capital ◽  
Oxford University ◽  
Contingent Capital ◽  
Liability Management ◽  
Editorial Decision ◽  
Debt Holders ◽  
Published Paper

AbstractThis paper studies liability management exercises (LME) by banks, which have comparable regulatory capital effects than contingent capital triggers. LMEs are concentrated on low capitalization situations, both in the cross-section and in the time series and are frequently associated with equity issuances. These exercises prove effective at improving bank capitalization levels. The market reaction to LMEs is positive and mostly accrues to debt holders. These findings strengthen the case for innovative liabilities securities as a tool to improve bank resilience.Received February 8, 2019; editorial decision May 16, 2019 by Editor Andrew Ellul. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Financial Constraints, Monetary Policy Shocks, and the Cross-Section of Equity Returns

2019 ◽  
Vol 33 (9) ◽  
pp. 4367-4402 ◽  
Author(s):  
Sudheer Chava ◽  
Alex Hsu
Keyword(s):  
Monetary Policy ◽  
Cross Section ◽  
Equity Returns ◽  
Monetary Policy Shocks ◽  
Federal Funds ◽  
Federal Funds Rate ◽  
Oxford University ◽  
Policy Shocks ◽  
The Cross ◽  
The Impact

Abstract We analyze the impact ofa unanticipated monetary policy changes on the cross-section of U.S. equity returns. Financially constrained firms earn a significantly lower (higher) return following surprise interest rate increases (decreases) as compared to unconstrained firms. This differential return response between constrained and unconstrained firms appears after a delay of 3 to 4 days. Further, unanticipated Federal funds rate increases are associated with a larger decrease in expected cash flow news, but not discount rate news, for constrained firms relative to unconstrained firms. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Global Political Uncertainty and Asset Prices

2019 ◽  
Vol 33 (4) ◽  
pp. 1737-1780 ◽  
Author(s):  
Jonathan Brogaard ◽  
Lili Dai ◽  
Phong T H Ngo ◽  
Bohui Zhang
Keyword(s):  
Equity Market ◽  
Equity Returns ◽  
Political Uncertainty ◽  
Election Cycle ◽  
Equity Prices ◽  
Sovereign Bond ◽  
Oxford University ◽  
Bond Returns ◽  
Published Paper ◽  
The U.S

Abstract We show that global political uncertainty, measured by the U.S. election cycle, on average, leads to a fall in equity returns in fifty non-U.S. countries. At the same time, market volatilities rise, local currencies depreciate, and sovereign bond returns increase. The effect of global political uncertainty on equity prices increases with the level of uncertainty in U.S. election outcomes and a country’s equity market exposure to foreign investors, but does not vary with the country’s international trade exposure. These findings suggest that global political uncertainty increases investors’ aggregate risk aversion, leading to a flight to safety.(JEL F30, F36, G12, G15, G18) Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Comparing Cross-Section and Time-Series Factor Models

2019 ◽  
Vol 33 (5) ◽  
pp. 1891-1926 ◽  
Author(s):  
Eugene F Fama ◽  
Kenneth R French
Keyword(s):  
Time Series ◽  
Cross Section ◽  
Factor Models ◽  
Constant Factor ◽  
Time Series Models ◽  
Time Varying ◽  
Oxford University ◽  
Regression Approach ◽  
Fama And French ◽  
Published Paper

Abstract We use the cross-section regression approach of Fama and MacBeth (1973) to construct cross-section factors corresponding to the time-series factors of Fama and French (2015). Time-series models that use only cross-section factors provide better descriptions of average returns than time-series models that use time-series factors. This is true when we impose constant factor loadings and when we use time-varying loadings that are natural for time-series factors and time-varying loadings that are natural for cross-section factors. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Publication Bias and the Cross-Section of Stock Returns

2019 ◽  
Vol 10 (2) ◽  
pp. 249-289 ◽  
Author(s):  
Andrew Y Chen ◽  
Tom Zimmermann
Keyword(s):  
Stock Returns ◽  
Publication Bias ◽  
Cross Section ◽  
Standard Error ◽  
P Value ◽  
Oxford University ◽  
Percentage Points ◽  
Sample Data ◽  
Out Of Sample ◽  
Published Paper

Abstract We develop an estimator for publication bias-adjusted returns and apply it to 156 published long-short portfolios. Our adjustment uses only in-sample data and provides sharper inferences than out-of-sample tests. Bias-adjusted returns are only 12.3% smaller than in-sample returns with a standard error of 1.7 percentage points. The small bias comes from the dispersion of returns across predictors, which is too large to be explained by data-mined noise. The bias is much smaller than post-publication decay (p-value ¡.0001), suggesting mispricing is important. Our results offer a different perspective about recent papers that find most published predictors are likely false. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Idiosyncratic Jump Risk Matters: Evidence from Equity Returns and Options

2019 ◽  
Vol 33 (1) ◽  
pp. 155-211 ◽  
Author(s):  
Jean-François Bégin ◽  
Christian Dorion ◽  
Geneviève Gauthier
Keyword(s):  
Risk Premium ◽  
Recent Literature ◽  
Equity Premium ◽  
Idiosyncratic Risk ◽  
Equity Returns ◽  
Jump Risk ◽  
Tail Risk ◽  
Oxford University ◽  
Editorial Decision ◽  
Published Paper

Abstract The recent literature provides conflicting empirical evidence about the pricing of idiosyncratic risk. This paper sheds new light on the matter by exploiting the richness of option data. First, we find that idiosyncratic risk explains 28% of the variation in the risk premium on a stock. Second, we show that the contribution of idiosyncratic risk to the equity premium arises exclusively from jump risk. Third, we document that the commonality in idiosyncratic tail risk is much stronger than that in total idiosyncratic risk documented in the literature. Tail risk thus plays a central role in the pricing of idiosyncratic risk. Received May 15, 2017; editorial decision September 12, 2018 by Editor Stijn Van Nieuwerburgh. Authors have furnished code and an Internet Appendix, which are available on the Oxford University PressWeb site next to the link to the final published paper online.

scholarly journals Dissecting Characteristics Nonparametrically

2020 ◽  
Vol 33 (5) ◽  
pp. 2326-2377 ◽  
Author(s):  
Joachim Freyberger ◽  
Andreas Neuhierl ◽  
Michael Weber
Keyword(s):  
Model Selection ◽  
Cross Section ◽  
Web Site ◽  
Functional Form ◽  
Expected Returns ◽  
Nonparametric Method ◽  
Selection Methods ◽  
Oxford University ◽  
Incremental Information ◽  
Published Paper

Abstract We propose a nonparametric method to study which characteristics provide incremental information for the cross-section of expected returns. We use the adaptive group LASSO to select characteristics and to estimate how selected characteristics affect expected returns nonparametrically. Our method can handle a large number of characteristics and allows for a flexible functional form. Our implementation is insensitive to outliers. Many of the previously identified return predictors don’t provide incremental information for expected returns, and nonlinearities are important. We study our method’s properties in simulations and find large improvements in both model selection and prediction compared to alternative selection methods. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Do CEOs Affect Employees’ Political Choices?

2019 ◽  
Vol 33 (4) ◽  
pp. 1781-1817 ◽  
Author(s):  
Ilona Babenko ◽  
Viktar Fedaseyeu ◽  
Song Zhang
Keyword(s):  
Web Site ◽  
Equity Returns ◽  
Campaign Contributions ◽  
Political Candidates ◽  
Oxford University ◽  
Political Preferences ◽  
Political Choices ◽  
Published Paper ◽  
Oxford University Press

Abstract We study the relation between CEO and employee campaign contributions and find that CEO-supported political candidates receive 3 times more money from employees than candidates not supported by the CEO. This relation holds around CEO departures, including plausibly exogenous departures due to retirement or death. Equity returns are significantly higher when CEO-supported candidates win elections than when employee-supported candidates win, suggesting that CEOs’ campaign contributions are more aligned with the interests of shareholders than are employee contributions. Finally, employees whose donations are misaligned with their CEOs’ political preferences are more likely to leave their employer. (JEL G30, G38, D72, P48) Authors have furnished an Internet Appendix and Data Supplement, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Factor Structure of the Hellenic WISC-III for Children with Learning Disabilities

2018 ◽  
Vol 9 (03) ◽  
pp. 20445-20451
Author(s):  
Adam A ◽  
Kiosseoglou G ◽  
Abatzoglou G ◽  
Papaligoura Z.
Keyword(s):  
Learning Disabilities ◽  
Factor Structure ◽  
Factor Model ◽  
The Other ◽  
Clinical Value ◽  
Reasoning Abilities ◽  
Picture Arrangement ◽  
Factorial Model ◽  
Verbal Subtest ◽  
Two Factors

The present research aims to examine the factor structure of the Hellenic WISC-III in a sample of 50 children with learning disabilities. The results show the existence of a factorial model with two factors, one aggregating the Comprehension verbal subtest with four performance subtests and the other the Picture Arrangement performance subtest with four verbal subtests. This two-factor model includes loadings in two factors that relate to the sequencing abilities and the verbal reasoning abilities of children. These findings assert the clinical value of the intelligence evaluation in these children.

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