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Author: Min S. Kim Publisher: ISBN: Category : Languages : en Pages : 69
Book Description
This paper suggests a novel approach for predicting aggregate stock returns at quarterly and annual frequencies. Weak return predictability is consistent with the view that a stationary component of stock prices is highly persistent. In such cases, expected returns are time-varying but also highly persistent. Given that all past innovations in expected returns decay slowly, it is almost impossible to capture current shocks to expected returns to predict subsequent returns. Instead, taking a first difference of returns nearly cancels out highly persistent expected returns. A variable that is correlated with current innovations to the stationary component of stock prices can predict changes in returns. Using aggregate asset growth (growth of household net worth) as a predictive variable delivers better out-of-sample forecasts for aggregate stock returns compared to other predictors.
Author: Min S. Kim Publisher: ISBN: Category : Languages : en Pages : 69
Book Description
This paper suggests a novel approach for predicting aggregate stock returns at quarterly and annual frequencies. Weak return predictability is consistent with the view that a stationary component of stock prices is highly persistent. In such cases, expected returns are time-varying but also highly persistent. Given that all past innovations in expected returns decay slowly, it is almost impossible to capture current shocks to expected returns to predict subsequent returns. Instead, taking a first difference of returns nearly cancels out highly persistent expected returns. A variable that is correlated with current innovations to the stationary component of stock prices can predict changes in returns. Using aggregate asset growth (growth of household net worth) as a predictive variable delivers better out-of-sample forecasts for aggregate stock returns compared to other predictors.
Author: Michael J. Cooper Publisher: ISBN: Category : Languages : en Pages : 22
Book Description
We document a strong negative relationship between the growth of total firm assets and subsequent firm stock returns using a broad sample of U.S. stocks. Over the past 40 years, low asset growth stocks have maintained a return premium of 20% per year over high asset growth stocks. The asset growth return premium begins in January following the measurement year and persists for up to five years. The firm asset growth rate maintains an economically and statistically important ability to forecast returns in both large capitalization and small capitalization stocks. In the cross-section of stock returns, the asset growth rate maintains large explanatory power with respect to other previously documented determinants of the cross-section of returns (i.e., size, prior returns, book-to-market ratios). We conclude that risk-based explanations have some difficulty in explaining such a large and consistent return premium.
Author: Michael J. Cooper Publisher: ISBN: Category : Languages : en Pages : 54
Book Description
We test for firm-level asset investment effects in returns by examining the cross-sectional relation between firm asset growth and subsequent stock returns. As a test variable, we use the year-on-year percentage change in total assets. Asset growth rates are strong predictors of future abnormal returns. Asset growth retains its forecasting ability even on large capitalization stocks, a subgroup of firms for which other documented predictors of the cross-section lose much of their predictive ability. When we compare asset growth rates with the previously documented determinants of the cross-section of returns (i.e., book-to-market ratios, firm capitalization, lagged returns, accruals, and other growth measures), we find that a firm's annual asset growth rate emerges as an economically and statistically significant predictor of the cross-section of U.S. stock returns.
Author: Wayne Ferson Publisher: MIT Press ISBN: 0262039370 Category : Business & Economics Languages : en Pages : 497
Book Description
An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.
Author: David G McMillan Publisher: Springer ISBN: 3319690086 Category : Business & Economics Languages : en Pages : 141
Book Description
This book provides a comprehensive analysis of asset price movement. It examines different aspects of stock return predictability, the interaction between stock return and dividend growth predictability, the relationship between stocks and bonds, and the resulting implications for asset price movement. By contributing to our understanding of the factors that cause price movement, this book will be of benefit to researchers, practitioners and policy makers alike.
Author: Martin Lettau Publisher: ISBN: Category : Dividends Languages : en Pages : 68
Book Description
We investigate a consumption-based present value relation that is a function of future dividend growth. Using data on aggregate consumption and measures of the dividend payments from aggregate wealth, we show that changing forecasts of dividend growth make an important contribution to fluctuations in the U.S. stock market, despite the failure of the dividend-price ratio to uncover such variation. In addition, these dividend forecasts are found to covary with changing forecasts of excess stock returns. The variation in expected dividend growth we uncover is positively correlated with changing forecasts of excess returns and occurs at business cycle frequencies, those ranging from one to six years. Because positively correlated fluctuations in expected dividend growth and expected returns have offsetting affects on the log dividend-price ratio, the results imply that both the market risk-premium and expected dividend growth vary considerably more than what can be revealed using the log dividend-price ratio alone as a predictive variable.
Author: Min S. Kim
Author: Min S. Kim
Author: Wolfgang Drobetz
Author: Michael J. Cooper
Author: John H. Cochrane
Author: Martin Lettau
Author: Michael J. Cooper
Author: Wayne Ferson
Author: David G McMillan
Author: Phillip Rochon Mack
Author: Martin Lettau