scholarly journals Liquidity as a long-term structural factor affecting asset pricing in Kazakhstan

2020 ◽  
pp. 274-278
Author(s):  
A. N. Tatibekova
Keyword(s):  
Asset Pricing ◽  
Structural Factor

A comparative computational and behavioral analysis of real estate performance

2017 ◽  
Vol 35 (3) ◽  
pp. 290-320 ◽  
Author(s):  
James R. DeLisle ◽  
Terry V. Grissom
Keyword(s):  
Asset Pricing ◽  
Financial Crisis ◽  
Real Estate ◽  
State Space ◽  
Hyperbolic Discounting ◽  
Time Preferences ◽  
Content Type ◽  
Agent Behavior ◽  
Market State

Purpose The purpose of this paper is to investigate changes in the commercial real estate market dynamics as a function of and conditional to the shifts in market state-space environment that can influence agent responses. Design/methodology/approach The analytical design uses a comparative computational experiment to address the performance of property assets in the current market based on comparison with prior structural patterns. The latent variables developed across market sectors are used to test agent behavior contingent on the perspectives of capital asset pricing conditionals (CAPM) and a behavioral momentum/herd construct. The state-space momentum analysis can assist the comparative analysis of current levels and shifts in property asset performance given the issues that have arisen with the financial crisis of 2007-2009. Findings An analytic approach is employed framed by a situation-dependent model. This frame considers risk profiles characterizing the perspectives and preferences guiding a delineated market state. This perspective is concerned with the possibility of shifts in market momentum and representativeness conditioning investor expectations. It is observed that the current market (post-crisis) has changed significantly from the prior operations (despite the diversity observed in prior market states). The dynamics of initial findings required an additional test anchored to the performance of the general capital market and the real economy across time. This context supports the use of a modified CAPM model allowing the consideration of opportunity cost in a space-time dynamic anchored with the consideration of equity, debt, riskless asset and liquidity options as they varied for the representative agents operating per market state. Research limitations/implications This paper integrates neoclassical and behavioral economic constructs. Combines asset pricing with prospect theory and allows the calculation of endogenous time-preferences, risk attitudes and formulation and testing of hyperbolic discounting functions. Practical implications The research shows that market structure and agent behavior since the financial crisis has changed from the investment and valuation perspectives operating as observed and measured from 1970 up to 2007. In contradiction to the long-term findings of Reinhart and Rogoff (2008), but in compliance with common perspectives and decision heuristics often employed by investors, this time things have changed! Discounting and expected rates of return are dynamic and are hyperbolic and not constant. Returns and investment for property assets are situational (market state-space specific) and offer a distinct asset class, not appropriately estimated by many of the traditional financial models. Social implications Assist in supporting insights to measure in errors and equations that result in inefficient resource allocation and beta discounting that supports the financial crisis created by assets subject to long-term decision needs (delta function). Originality/value The paper offers a combination and comparison of neoclassic asset pricing using a modified CAPM (two-pass) approach within the structural frame of Kahneman and Tversky’s (1979) prospect theory. This technique allows the consideration of the effects of present bias, beta-delta functions and the operation of the Allais Paradox in market states that are characterized by gains and losses and thus risk aversion and risk seeking behavior. This ability for differentiation allows for the development of endogenous time-preferences and hyperbolic discounting factors characteristic of commercial property investment.

Long-term perspective on the stock market matters in asset pricing

2016 ◽  
Vol 16 ◽  
pp. 162-170
Author(s):  
Heungju Park ◽  
Bumjean Sohn
Keyword(s):  
Asset Pricing ◽  
Stock Market

Long-term prior return patterns in stock and sector returns in India

2014 ◽  
Vol 11 (2) ◽  
pp. 192-210
Author(s):  
Sanjay Sehgal ◽  
Sakshi Jain
Keyword(s):  
Asset Pricing ◽  
Stock Returns ◽  
Risk Model ◽  
Factor Model ◽  
Size Factor ◽  
Content Type ◽  
Long Run ◽  
Portfolio Managers ◽  
Sector Returns

Purpose – The purpose of this paper is to analyze long-term prior return patterns in stock returns for India. Design/methodology/approach – The methodology involves portfolio generation based on company characteristics and long-term prior return (24-60 months). The characteristic sorted portfolios are then regressed on risk factors using one factor (capital asset pricing model (CAPM)) and multi-factor model (Fama-French (FF) model and four factor model involving three FF factors and an additional sectoral momentum factor). Findings – After controlling for short-term momentum (up to 12 months) as documented by Sehgal and Jain (2011), the authors observe that weak reversals emerge for the sample stocks. The risk model CAPM fails to account for these long-run prior return patterns. FF three-factor model is able to explain long-term prior return patterns in stock returns with the exception of 36-12-12 strategy. The value factor plays an important role while the size factor does not explain cross-section of average returns. Momentum patterns exist in long-term sector returns, which are stronger for long-term portfolio formation periods. Further, the authors construct sector factor and observe that prior returns patterns in stock returns are partially absorbed by this factor. Research limitations/implications – The findings are relevant for investment analysts and portfolio managers who are continuously tracking global markets, including India, in pursuit of extra normal returns. Originality/value – The study contributes to the asset pricing and behavioral literature from emerging markets.

scholarly journals Are sustainable investments crisis resistant?

2020 ◽  
Vol 7 (4) ◽  
pp. 489-508
Author(s):  
Nóra Judit Szepesi
Keyword(s):  
Asset Pricing ◽  
Pricing Models ◽  
Sustainable Operations ◽  
Screening Criteria ◽  
Research Hypothesis ◽  
Stock Portfolios ◽  
Asset Pricing Models ◽  
Set Up ◽  
Sustainable Investments

An argument often voiced to support ESG investments is they are means to finance less risky industries and companies engaged in long-term sustainable operations. According to the author’s research hypothesis, investors in crisis periods turn their attention to stocks rated high from an ESG aspect, and as a result of increased demand, portfolios set up from ESG stocks overperform the market to generate significant positive alpha. To test her hypothesis, the author analysed the alpha-generating performance of six different stock portfolios set up meeting different ESG screening criteria in crisis periods between January 2003 and December 2019 applying three asset pricing models. The findings unambiguously reject the research hypothesis. They are robust both for different crisis definitions and cut-offs for portfolio selection.

Macroeconomic Risks and Asset Pricing: Evidence from a Dynamic Stochastic General Equilibrium Model

2019 ◽  
Vol 65 (8) ◽  
pp. 3585-3604 ◽  
Author(s):  
Erica X. N. Li ◽  
Haitao Li ◽  
Shujing Wang ◽  
Cindy Yu
Keyword(s):  
Asset Pricing ◽  
General Equilibrium ◽  
Factor Model ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Model ◽  
Cross Sectional ◽  
Dynamic Stochastic ◽  
Monetary Policy Shock ◽  
Macroeconomic Risks

We study the relation between macroeconomic fundamentals and asset pricing through the lens of a dynamic stochastic general equilibrium (DSGE) model. We provide full-information Bayesian estimation of the DSGE model using macroeconomic variables and extract the time series of four latent fundamental shocks of the model: neutral technology shock, investment-specific technological shock, monetary policy shock, and risk shock. Asset pricing tests show that our model-implied four-factor model can explain a number of prominent cross-sectional return spreads: size, book-to-market, investment, earnings, and long-term reversal. The investment-specific technological shock and risk shock play the most important role in explaining those return spreads. This paper was accepted by Neng Wang, finance.

Can traders beat the market? Evidence from insider trades

2014 ◽  
Vol 4 (3) ◽  
pp. 243-270 ◽  
Author(s):  
Qin Lei ◽  
Murli Rajan ◽  
Xuewu Wang
Keyword(s):  
Asset Pricing ◽  
Aggregate Level ◽  
Content Type ◽  
Portfolio Returns ◽  
Time Investment ◽  
Fundamental Information ◽  
Insider Trades ◽  
Data Limitations ◽  
Pricing Factors

Purpose – The purpose of this paper is to investigate how insiders’ trades are executed and whether and how outside investors can mimic outperforming insiders and reap substantial portfolio returns that withstand the erosion from adjustments for both the standard factors and stock characteristics in the asset pricing literature. Design/methodology/approach – The authors design a metric for measuring insiders’ trade execution quality: the trading alpha. The authors run regression analysis to control for trade difficulty, insider reputations and the corporate role ranks of insiders and document the existence of the abnormal trading alpha. The authors further form portfolios based on the abnormal trading alpha and document a significant abnormal return that is robust to both standard asset pricing factors model and the stock characteristics adjustments. Findings – Outperforming insiders at the aggregate level resemble value investors who trade on long-term fundamental information, trade patiently and earn rents from providing liquidity. Outside investors can mimic the outperforming insiders and reap significant abnormal portfolio returns. Research limitations/implications – Data limitations on insider trades and their association/interaction with their brokers prevent us from having a conclusive investigation of the trading skill hypothesis. The authors hope to further research along the lines of the trading skill hypothesis as compared to investment style hypothesis with more detailed data about the brokers used by insiders. Practical implications – The findings can be applied for money management profession in that outsider investors can monitor the trading execution and construct portfolios based on the adjusted abnormal trading alpha. The resulting portfolio has been documented to be highly profitable after risk adjustments using standard asset pricing factors as well as stock characteristics. Social implications – Professional money managers and outsider investors should be able to benefit from the findings in this paper and use the proposed trading alpha metric to construct and rebalance real-time investment portfolios. Originality/value – Outperforming insiders at the aggregate level resemble value investors who act on long-term fundamental information, trade patiently and earn rents from providing liquidity. From the perspective of investment implications, outside investors can mimic the outperforming insiders and reap substantial portfolio returns that withstand the erosion from adjustments for both the standard factors and stock characteristics in the asset pricing literature.

FINANCIAL MARKETS EFFICIENCY(NOBEL MEMORIAL PRIZE IN ECONOMICS 2013)

2014 ◽  
pp. 4-21
Author(s):  
R. Sverchkov ◽  
K. Sonin
Keyword(s):  
Asset Pricing ◽  
Stock Market ◽  
Financial Markets ◽  
Nobel Prize ◽  
Behavioral Finance ◽  
Pricing Models ◽  
Asset Pricing Models ◽  
Short And Long Term ◽  
Russian Stock Market

The paper describes the main contributions of the 2013 Nobel Prize winners in economics E. Fama, R. Shiller and L.-P. Hansen in the analysis of the financial markets efficiency. Discussed are the very idea of the impossibility to systematically gain riskless profits in the short- and long-term perspectives, the fomalizations of this idea in the key asset pricing models, methods of testing these models, and the theory of behavioral finance as one of the explanations of the inefficiency and irrationality of financial markets. A short overview of the research dealing with the efficiency of Russian stock market is also given.

Asset Pricing with Concentrated Ownership of Capital and Distribution Shocks

2015 ◽  
Vol 7 (4) ◽  
pp. 67-103 ◽  
Author(s):  
Kevin J. Lansing
Keyword(s):  
Asset Pricing ◽  
Risk Premium ◽  
Equity Premium ◽  
Physical Capital ◽  
Short Term ◽  
Agent Model ◽  
Asset Pricing Model ◽  
Concentrated Ownership ◽  
Equity Risk

This paper develops a production-based asset pricing model with two types of agents and concentrated ownership of physical capital. A temporary but persistent “distribution shock” causes the income share of capital owners to fluctuate in a procyclical manner, consistent with US data. The concentrated ownership model significantly magnifies the equity risk premium relative to a representative-agent model because the capital owners' consumption is more-strongly linked to volatile dividends from equity. With a steady-state risk aversion coefficient around 4, the model delivers an unlevered equity premium of 3.9 percent relative to short-term bonds and a premium of 1.2 percent relative to long-term bonds. (JEL D31, E13, E25, E32, E44, G12)

scholarly journals Long-Term versus Short-Term Contingencies in Asset Allocation

2017 ◽  
Vol 52 (5) ◽  
pp. 2277-2303
Author(s):  
Mahmoud Botshekan ◽  
André Lucas
Keyword(s):  
Asset Pricing ◽  
Stock Market ◽  
Asset Allocation ◽  
Yield Spread ◽  
State Variables ◽  
Dividend Yield ◽  
Short Term ◽  
Out Of Sample ◽  
Sharpe Ratios

We investigate whether long-term and short-term components of typical conditioning variables in asset pricing studies, such as the dividend yield or yield spread, have different implications for optimal asset allocation. We argue that short-term components relate mostly to momentum, and long-term components relate mostly to mean-reversion effects, respectively. Therefore, they may have a different information content for investors with different horizons. We obtain improvements in terms of out-of-sample Sharpe ratios and expected utilities for decomposed state variables that directly reflect information related to the stock market, such as the dividend yield and stock market trend.

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