scholarly journals VAR AND THE CROSS-SECTION OF EXPECTED STOCK RETURNS: AN EMERGING MARKET EVIDENCE

2014 ◽  
Vol 15 (3) ◽  
pp. 441-459 ◽  
Author(s):  
Dar-Hsin Chen ◽  
Chun-Da Chen ◽  
Su-Chen Wu
Keyword(s):  
At Risk ◽  
Risk Factor ◽  
Stock Market ◽  
Stock Returns ◽  
Value At Risk ◽  
Emerging Market ◽  
Explanatory Power ◽  
Cross Sectional ◽  
Expected Stock Returns ◽  
The Cross

In this paper we investigate the explanatory power of the market beta, firm size, and the book-to-market ratio, as well as Value-at-Risk regarding the cross-sectional expected stock returns in a less developed stock market – Taiwan's stock market. The main purpose is to examine whether the Value-at-Risk factor has marginal explanatory power related to the Fama-French three-factor model. The empirical results show that Value-at-Risk can account for the average stock returns at both 1% and 5% significance levels based on cross-sectional regression analysis. Moreover, from the perspective of the time series regression, the Value-at-Risk factor can also demonstrate the variation of the stock market, especially for the larger companies in the Taiwan stock market.

scholarly journals Value-at-Risk and Expected Stock Returns: Evidence from Pakistan

2014 ◽  
Vol 19 (2) ◽  
pp. 71-100 ◽  
Author(s):  
Javed Iqbal ◽  
Sara Azher
Keyword(s):  
At Risk ◽  
Stock Returns ◽  
Value At Risk ◽  
Emerging Market ◽  
Explanatory Power ◽  
Expected Returns ◽  
Empirical Performance ◽  
Expected Stock Returns ◽  
Time Series Approach ◽  
Market Factors

This study investigates whether exposure to downside risk, as measured by value-at-risk (VaR), explains expected returns in an emerging market, i.e., Pakistan. We find that portfolios with a higher VaR are associated with higher average returns. In order to explore the empirical performance of VaR at the portfolio level, we use a time series approach based on 25 size and book-to-market portfolios. Based on monthly portfolio data for October 1992 to June 2008, the results show that VaR has greater explanatory power than the market, size, and book-to-market factors.

scholarly journals The Cross-Section of Expected Stock Returns in Brazil

2016 ◽  
Vol 14 (2) ◽  
pp. 151
Author(s):  
Gyorgy Varga ◽  
Ricardo Dias de Oliveira Brito
Keyword(s):  
Risk Factors ◽  
Stock Market ◽  
Stock Returns ◽  
Cross Section ◽  
Explanatory Power ◽  
Positive Relation ◽  
Cross Sectional ◽  
Expected Stock Returns ◽  
The Cross

In a sample of the Brazilian stock market from 1999 to 2015, this paper shows that the book-to-market and momentum of individual firms capture some of the cross-sectional variation in average stock returns, while the market β and size do not play a role. The positive relation of cross-section of returns with book-to-market is more evident earlier, while the positive relation with momentum is stronger later in the sample. However, because none of these characteristics show explanatory power for all the subsamples studied, we are not fully convinced that they capture fundamental risk factors.

scholarly journals Previsibilidade de Retorno das Ações na Bovespa: Um Teste Envolvendo o Modelo de Fator de Retorno Esperado

2004 ◽  
Vol 2 (2) ◽  
pp. 183
Author(s):  
Luciano Martin Rostagno ◽  
Gilberto De Oliveira Kloeckner ◽  
João Luiz Becker
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Trading Volume ◽  
Factor Model ◽  
Explanatory Power ◽  
Return Predictability ◽  
Expected Return ◽  
Cross Sectional ◽  
Theoretical Assumptions ◽  
History Of

This paper examines the hypothesis of asst return predictability in the Brazilian Stock Market (Bovespa). Evidence suggests that seven factors explain most of the monthly differential returns of the stocks included in the sample. Within the factors that present statistically significant mean, two are liquidity factors (market capitalization and trading volume trend), three refer to price level of stocks (dividend to price, dividend to price trend, and cash flow to price), and two relate to price history of stocks (3 and 12 months excess return). Contradicting theoretical assumptions, risk factors present no explanatory power on cross-sectional returns. Using an expected return factor model, it is contended that stock returns are quite predictable. An investment simulation shows that the model is able to assemble portfolios with statistically significant higher returns. Additional tests indicate that the winner portfolios are not fundamentally riskier suggesting mispricing of assets in the Brazilian stock Market.

scholarly journals Extreme value theory in emerging markets: Evidence from the Montenegrin stock exchange

2015 ◽  
Vol 60 (206) ◽  
pp. 87-116 ◽  
Author(s):  
Julija Cerovic ◽  
Vesna Karadzic
Keyword(s):  
At Risk ◽  
Stock Market ◽  
Extreme Value Theory ◽  
Value At Risk ◽  
Emerging Market ◽  
Value Theory ◽  
Extreme Value ◽  
Peaks Over Threshold ◽  
Threshold Method ◽  
Block Maxima

The concept of Value at Risk(VaR) estimates the maximum loss of a financial position at a given time for a given probability. This paper considers the adequacy of the methods that are the basis of extreme value theory in the Montenegrin emerging market before and during the global financial crisis. In particular, the purpose of the paper is to investigate whether the peaks-over-threshold method outperforms the block maxima method in evaluation of Value at Risk in emerging stock markets such as the Montenegrin market. The daily return of the Montenegrin stock market index MONEX20 is analyzed for the period January 2004 - February 2014. Results of the Kupiec test show that the peaks-over-threshold method is significantly better than the block maxima method, but both methods fail to pass the Christoffersen independence test and joint test due to the lack of accuracy in exception clustering when measuring Value at Risk. Although better, the peaks-over-threshold method still cannot be treated as an accurate VaR model for the Montenegrin frontier stock market.

Can the Cross-Sectional Variation in Expected Stock Returns Explain Momentum?

2009 ◽  
Vol 44 (4) ◽  
pp. 777-794 ◽  
Author(s):  
George Bulkley ◽  
Vivekanand Nawosah
Keyword(s):  
Stock Returns ◽  
Expected Returns ◽  
Sample Period ◽  
Expected Return ◽  
Cross Sectional ◽  
Holding Period ◽  
Expected Stock Returns ◽  
The Cross

AbstractIt has been hypothesized that momentum might be rationally explained as a consequence of the cross-sectional variation of unconditional expected returns. Stocks with relatively high unconditional expected returns will on average outperform in both the portfolio formation period and in the subsequent holding period. We evaluate this explanation by first removing unconditional expected returns for each stock from raw returns and then testing for momentum in the resulting series. We measure the unconditional expected return on each stock as its mean return in the whole sample period. We find momentum effects vanish in demeaned returns.

Idiosyncratic Volatility and the Cross Section of Expected Returns

2008 ◽  
Vol 43 (1) ◽  
pp. 29-58 ◽  
Author(s):  
Turan G. Bali ◽  
Nusret Cakici
Keyword(s):  
Stock Returns ◽  
Cross Section ◽  
Idiosyncratic Volatility ◽  
Expected Returns ◽  
Cross Sectional ◽  
Monthly Data ◽  
Portfolio Returns ◽  
Expected Stock Returns ◽  
The Cross ◽  
Data Frequency

AbstractThis paper examines the cross-sectional relation between idiosyncratic volatility and expected stock returns. The results indicate that i) the data frequency used to estimate idiosyncratic volatility, ii) the weighting scheme used to compute average portfolio returns, iii) the breakpoints utilized to sort stocks into quintile portfolios, and iv) using a screen for size, price, and liquidity play critical roles in determining the existence and significance of a relation between idiosyncratic risk and the cross section of expected returns. Portfoliolevel analyses based on two different measures of idiosyncratic volatility (estimated using daily and monthly data), three weighting schemes (value-weighted, equal-weighted, inverse volatility-weighted), three breakpoints (CRSP, NYSE, equal market share), and two different samples (NYSE/AMEX/NASDAQ and NYSE) indicate that no robustly significant relation exists between idiosyncratic volatility and expected returns.

Is there a priced risk factor associated with conservatism?

2016 ◽  
Vol 17 (5) ◽  
pp. 545-561 ◽  
Author(s):  
Kerstin Lopatta ◽  
Felix Canitz ◽  
Christian Fieberg
Keyword(s):  
Risk Factor ◽  
Stock Returns ◽  
Design Methodology ◽  
Systematic Risk ◽  
Factor Loading ◽  
Related Factor ◽  
Cross Sectional ◽  
Content Type ◽  
Conditional Conservatism ◽  
The Cross

Purpose García Lara et al. (2011) argue that there is a conservatism-related priced risk factor in US stock returns. To put this to the test, the authors aim to analyze whether the conditional conservatism effect comes from the loading on a conditional conservatism-related factor-mimicking portfolio (systematic risk) or the conservatism characteristic itself. Design/methodology/approach The authors form characteristic-balanced portfolios from dependent sorts of stocks on the firm’s degree of conservatism and the firm’s loading on the conservatism-related factor-mimicking portfolio as proposed by Daniel and Titman (1997) and Davis et al. (2000). Findings The tests indicate that it is the conditional conservatism characteristic rather than the factor loading that explains the cross-sectional differences in average stock returns. Consequently, they do not find evidence for a conservatism-related priced risk factor. Originality/value This finding suggests that investors misvalue the conservatism characteristic and casts doubt on the rational risk explanation as proposed by García Lara et al. (2011).

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