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Author: Rui Zeng Publisher: ISBN: Category : Languages : en Pages : 41
Book Description
I present empirical evidence that the TED spread is a priced risk factor in the cross sectional stock returns. Stocks with higher exposure to the change in the TED spread require higher returns, and the value weighted return difference between the high sensitivity portfolio and the low sensitivity portfolio is a significant 6.6% annually. The TED factor exercises better forecasting ability within the non-crisis periods and big stocks. My result provides further empirical support for Garleanu and Pedersen (2011) margin based asset pricing model, in which margin requirement captures the asset's exposure to the shadow cost of the inter bank borrowing (the TED spread), and stocks with higher exposure require a higher return premium, in addition to their exposures to the conventional systematic risk factors.
Author: Rui Zeng Publisher: ISBN: Category : Languages : en Pages : 41
Book Description
I present empirical evidence that the TED spread is a priced risk factor in the cross sectional stock returns. Stocks with higher exposure to the change in the TED spread require higher returns, and the value weighted return difference between the high sensitivity portfolio and the low sensitivity portfolio is a significant 6.6% annually. The TED factor exercises better forecasting ability within the non-crisis periods and big stocks. My result provides further empirical support for Garleanu and Pedersen (2011) margin based asset pricing model, in which margin requirement captures the asset's exposure to the shadow cost of the inter bank borrowing (the TED spread), and stocks with higher exposure require a higher return premium, in addition to their exposures to the conventional systematic risk factors.
Author: Bing Han Publisher: ISBN: Category : Languages : en Pages : 49
Book Description
We explore the link between credit and equity markets by considering the informational content of the term structure of credit spreads. A shallower credit term structure predicts decreases in default risk, increases in future profitability, as well as favorable earnings surprises. Further, the slope of the credit term structure negatively predicts future stock returns. While systematic slope risk is also priced, information diffusion from the credit market to equities, particularly in less visible stocks, plays an additional role in accounting for return predictability from credit slopes: Such predictability is less evident in stocks with high institutional ownership, analyst coverage, and liquidity, and vice versa.
Author: Akiko Watanabe Publisher: ISBN: Category : Languages : en Pages : 53
Book Description
This paper studies whether stock returns' sensitivities to aggregate liquidity fluctuations and the pricing of liquidity risk vary over time. We find that liquidity betas vary across two distinct states: one with high liquidity betas and the other with low betas. The high liquidity-beta state is short lived and characterized by heavy trade, high volatility, and a wide cross-sectional dispersion in liquidity betas. It also delivers a disproportionately large liquidity risk premium, amounting to more than twice the value premium. Our results are consistent with a model of liquidity risk in which investors face uncertainty about their trading counterparties' preferences.
Author: Rui Zeng Publisher: ISBN: Category : Languages : en Pages : 50
Book Description
I present empirical evidence that the TED spread is a priced risk factor in the cross sectional stock returns. Stocks with higher exposure to the change in the TED spread require higher returns, and the return difference between the high sensitivity portfolio and the low sensitivity portfolio is a significant 6.6% annually. Individual stocks within the two extreme TED beta portfolios are more likely to be financially distressed, which is consistent with the documented hump-shaped relationship between expected return and default probability in Garlappi, Tao, and Yan (2008). The TED factor shows enhanced forecasting ability within non-crisis periods, and the size effect shows up only within the group of most distressed firms. This paper uncovers a systematic channel to reconcile the positive risk premium and negative risk premium found within the financially distressed stocks, and provide strong empirical evidence for the effect of credit supplying activities on corporate financing behaviors and stock performances.
Author: Doron Avramov Publisher: ISBN: Category : Languages : en Pages : 37
Book Description
Low credit risk firms realize higher returns than high credit risk firms. This effect is puzzling because investors seem to pay a premium for bearing credit risk. This paper shows that the credit risk effect manifests itself due to the poor performance of low-rated stocks during periods of financial distress at least three months before and after credit rating downgrades. Around downgrades, low-rated firms experience considerable negative returns amid strong institutional selling, whereas returns do not differ across credit risk groups in stable or improving credit conditions. Remarkably, the group of low-rated stocks driving the credit risk effect accounts for about 4.2% of the total market capitalization. Isolating the credit risk effect to a limited number of firms in a specific set of circumstance allows us to distinguish between its potential explanations. Our evidence points away from risk-based explanations, and towards mispricing generated by retail investors and sustained by illiquidity and short sell constraints.
Author: Frank J. Fabozzi, CFA Publisher: John Wiley & Sons ISBN: 9781883249823 Category : Business & Economics Languages : en Pages : 286
Book Description
This is the second edition of Professional Perspectives on Indexing. Contents include the active versus passive debate, Standard and Poor's U.S. equity indexes, medium and small capitalization indexing, global equity index families, investing in index mutual funds, and more.
Author: Rui Zeng
Author: Rui Zeng
Author: Stijn Claessens
Author: Bing Han
Author: Vinay Datar
Author: Akiko Watanabe
Author: 
Author: Rui Zeng
Author: Bank of Canada
Author: Doron Avramov
Author: Frank J. Fabozzi, CFA