scholarly journals Impact of consumer confidence on the expected returns of the Tokyo Stock Exchange: A comparative analysis of consumption and production-based asset pricing models

PLoS ONE ◽  
2020 ◽  
Vol 15 (11) ◽  
pp. e0241318
Author(s):  
Javier Rojo-Suárez ◽  
Ana Belén Alonso-Conde
Keyword(s):  
Comparative Analysis ◽  
Asset Pricing ◽  
Stock Exchange ◽  
Consumer Confidence ◽  
Expected Returns ◽  
Pricing Models ◽  
Asset Pricing Models ◽  
Tokyo Stock Exchange

Linear Beta Pricing with Inefficient Benchmarks

2013 ◽  
Vol 03 (01) ◽  
pp. 1350004 ◽  
Author(s):  
George Diacogiannis ◽  
David Feldman
Keyword(s):  
Asset Pricing ◽  
Market Risk ◽  
Expected Returns ◽  
Pricing Model ◽  
Pricing Models ◽  
Expected Return ◽  
Risk Premiums ◽  
Asset Pricing Models ◽  
Current Asset ◽  
Mean Variance

Current asset pricing models require mean-variance efficient benchmarks, which are generally unavailable because of partial securitization and free float restrictions. We provide a pricing model that uses inefficient benchmarks, a two-beta model, one induced by the benchmark and one adjusting for its inefficiency. While efficient benchmarks induce zero-beta portfolios of the same expected return, any inefficient benchmark induces infinitely many zero-beta portfolios at all expected returns. These make market risk premiums empirically unidentifiable and explain empirically found dead betas and negative market risk premiums. We characterize other misspecifications that arise when using inefficient benchmarks with models that require efficient ones. We provide a space geometry description and analysis of the specifications and misspecifications. We enhance Roll (1980), Roll and Ross's (1994), and Kandel and Stambaugh's (1995) results by offering a "Two Fund Theorem," and by showing the existence of strict theoretical "zero relations" everywhere inside the portfolio frontier.

scholarly journals CAPM or APT? A Comparison of Two Asset Pricing Models for Malaysia

2020 ◽  
Author(s):  
Cung Huck Khoon ◽  
Ahmadu Umaru Sanda ◽  
G.S Gupta
Keyword(s):  
Asset Pricing ◽  
Stock Exchange ◽  
Capital Asset Pricing ◽  
Arbitrage Pricing Theory ◽  
Kuala Lumpur ◽  
Pricing Models ◽  
Market Index ◽  
Asset Pricing Models ◽  
Monthly Return ◽  
Pricing Theory

This study uses monthly return data on 213 stocks listed on the main board of Kuala Lumpur Stock Exchange, Malaysia for the period September 1988 to June 1997 to compare two frequently cited asset pricing models: the capital asset pricing model, CAPM and the arbitrage pricing theory, APT. A comparison was performed along the lines of Chen (1983) and the results showed the APT to perform better than the CAP/ in explaining the variations in cross section of returns. The implication for investors is that the market index is but one of several sources of risk, which should be taken into account in any decision governing investment in the stock market.  

Term Structure of Risk in Expected Returns

2021 ◽  
Author(s):  
Irina Zviadadze
Keyword(s):  
Asset Pricing ◽  
Term Structure ◽  
Expected Returns ◽  
Pricing Models ◽  
Structural Shocks ◽  
Risk Return ◽  
Asset Pricing Models ◽  
Long Run ◽  
Multiple Shocks ◽  
Long Run Risk

Abstract This paper develops a methodology to test structural asset pricing models based on their implications for the multiperiod risk-return trade-off. A new measure, the term structure of risk, captures the sensitivities of multiperiod expected returns to structural shocks. The level and slope of the term structure of risk can indicate misspecification in equilibrium models. I evaluate the performance of asset pricing models with long-run risk, consumption disasters, and variance shocks. I find that only a model with multiple shocks in the variance of consumption growth is consistent with the propagation of and compensation for risk in the aggregate stock market.

Testing International Asset Pricing Models Using Implied Costs of Capital

2009 ◽  
Vol 44 (2) ◽  
pp. 307-335 ◽  
Author(s):  
Charles Lee ◽  
David Ng ◽  
Bhaskaran Swaminathan
Keyword(s):  
Asset Pricing ◽  
World Market ◽  
Idiosyncratic Volatility ◽  
Expected Returns ◽  
International Asset Pricing ◽  
Pricing Models ◽  
Firm Level ◽  
Economic Relations ◽  
Asset Pricing Models ◽  
Market Beta

AbstractThis paper tests international asset pricing models using firm-level expected returns estimated from an implied cost of capital approach. We show that the implied approach provides clear evidence of economic relations that would otherwise be obscured by the noise in realized returns. Among G-7 countries, expected returns based on implied costs of capital have less than one-tenth the volatility of those based on realized returns. Our tests show that firm-level expected returns increase with world market beta, idiosyncratic volatility, financial leverage, and book-to-market ratios, and decrease with currency beta and firm size.

scholarly journals Stock Market Values And P/E Ratios As Predictors Of New York Stock Exchange Delistings

2011 ◽  
Vol 4 (3) ◽  
pp. 56
Author(s):  
Aaron L. Phillips
Keyword(s):  
New York ◽  
Asset Pricing ◽  
Firm Size ◽  
Stock Exchange ◽  
Anomalous Behavior ◽  
Pricing Models ◽  
Market Values ◽  
Asset Pricing Models ◽  
York Stock Exchange ◽  
Survivor Bias

The price-to-earnings ratio effect and the small firm effect literature suggests that stock markets are inefficient, asset pricing models are misspecified, or both. Consequently, it appears that one can earn positive, abnormal, risk-adjusted returns by investing in select stocks based on P/E ratio, firm size, or other anomalous behavior criteria. One potential explanation for the abnormal return observations is survivor bias in tests of asset pricing models. This research reports the results of an empirical investigation of delisting as a possible contributor to anomalous behaviors. The evidence indicates that delisting fails to contribute to the P/E effect; however, firm size is associated with delisting when survivor bias is controlled.

Buy Now and Pay (Dearly) Later: Unraveling Consumer Financial Spinning

2021 ◽  
Vol 9 (4) ◽  
pp. 55
Author(s):  
Olivier Mesly
Keyword(s):  
Asset Pricing ◽  
Expected Returns ◽  
Capital Asset Pricing ◽  
Capital Asset ◽  
Pricing Models ◽  
Psychological Conditions ◽  
Asset Pricing Models ◽  
Household Portfolio ◽  
The Relationship ◽  
Modeling Principles

In this challenging and innovative article, we propose a framework for the consumer behavior named “consumer financial spinning”. It occurs when borrowers-consumers of products with high financial stakes accumulate unsustainable debt and disconnect from their initial financial hierarchy of needs, wealth-related goals, and preferences over their household portfolio of assets. Three behaviors characterize daredevil consumers as they spin their wheel of misfortune, which together form a dark financial triangle: overconfidence, use of rationed rationality, and deceitfulness. We provokingly adapt some of the tenets of the Markowitz and Capital Asset Pricing models in the context of the predatory paradigm that consumer financial spinning entails and use modeling principles from the data percolation methodology. We partially test the proposed framework and show under what realistic conditions the relationship between expected returns and risk may depart from linearity. Our analysis and results appear timely and important because a better understanding of the psychological conditions that fuel intense speculation may restrain market frictions, which historically have kept reappearing and are likely to reoccur on a regular basis.

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