Essays on Stock Return Predictability and Market Efficiency PDF Download

Author: Lei Jiang
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Author: Arthur Ritter
Publisher: GRIN Verlag
ISBN: 3656968926
Category : Business & Economics
Languages : en
Pages : 21

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Research Paper (postgraduate) from the year 2015 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 17 (1,3), University of St Andrews (School of Management), course: Investment and Portfolio Management, language: English, abstract: Empirical evidence of stock return predictability obtained by financial ratios or macroeconomic factors has received substantial attention and remains a controversial topic to date. This is no surprise given that the existence of return predictability is not only of interest to practitioners but also introduces severe implications for financial models of risk and return. Founded on the assumption of efficient capital markets, research on capital asset pricing models has instigated this emergence of stock return predictability factors. Analysing these factors categorically, this paper will provide a balanced discussion of advocates as well as sceptics of stock return predictability. This essay will commence by firstly outlining the fundamental assumptions of an efficient capital market and its implications for return predictability. Subsequently, a thorough focus will be placed on the most significant predictability factors, including fundamental financial ratios and macroeconomic indicators as well as the validity of sampling methods used to attain return forecasts. Lastly this essay will reflect on the findings while proposing areas of further research.

Author: Anselm Rogowski
Publisher:
ISBN: 9783656968931
Category :
Languages : en
Pages : 20

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Book Description
Research Paper from the year 2015 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 17 (1,3), University of St Andrews (School of Management), course: Investment and Portfolio Management, language: English, abstract: Empirical evidence of stock return predictability obtained by financial ratios or macroeconomic factors has received substantial attention and remains a controversial topic to date. This is no surprise given that the existence of return predictability is not only of interest to practitioners but also introduces severe implications for financial models of risk and return. Founded on the assumption of efficient capital markets, research on capital asset pricing models has instigated this emergence of stock return predictability factors. Analysing these factors categorically, this paper will provide a balanced discussion of advocates as well as sceptics of stock return predictability. This essay will commence by firstly outlining the fundamental assumptions of an efficient capital market and its implications for return predictability. Subsequently, a thorough focus will be placed on the most significant predictability factors, including fundamental financial ratios and macroeconomic indicators as well as the validity of sampling methods used to attain return forecasts. Lastly this essay will reflect on the findings while proposing areas of further research.

Author: Amit Goyal
Publisher:
ISBN:
Category : Stocks
Languages : en
Pages : 374

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Author: Qing Bai
Publisher:
ISBN:
Category :
Languages : en
Pages : 96

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The dissertation consists of two essays. Essay I examines the return predictability by firm level R & D and innovation measures and shows that technology spillover helps to explain the positive innovation-return relation. Essay II propose a novel measure of conditional value premium based on firm's stock split announcement. This measure is shown to have a strong predicting power over value premium both in sample and out of sample. Essay I: I show that technology spillovers are important information phenomena that benefit both other innovators (as emphasized in the Industrial Organization literature) and stock market investors. I find that the premium associated with R & D and patenting activities is largely restricted to firms located in more isolated technology spaces with fewer spillovers. Moreover, there is a strong lead-lag effect among firms engaging in innovative activities: the stock prices of firms in more isolated technology spaces react more slowly to new information than do the stock prices of firms in more competitive technology spaces. Finally, announcement-day returns to patent grants are greater for more technologically important patents (measured by forward citations), but only for firms in more crowded technology spaces. My results indicate that investors are able to value innovative investments by exploiting the information flows associated with greater technology spillovers. Essay II: I propose a novel conditional value premium measure based on the present-value relation that the stock price impact of a firm's public announcement reveals the firm's expected discount rates. Specifically, because most splitting stocks are growth stocks on which, by construction, the value premium has strong influence, the average splitting stock announcement-day returns track closely conditional value premium. I find very similar results using announcements of divested asset acquisitions in which acquirers are usually growth firms. Consistent with risk-based explanations, my conditional value premium measure correlates positively with future GDP growth and helps explain the cross-section of stock returns.

Author: Yuzhao Zhang
Publisher:
ISBN:
Category : Investments
Languages : en
Pages : 316

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Author: Ruojun Wu
Publisher:
ISBN:
Category : Bayesian statistical decision theory
Languages : en
Pages : 137

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This dissertation studies the effect of parameter uncertainty on the return predictability and volatility of the stock market. The first two chapters focus on the decomposition of market volatility, and the third chapter studies the return predictability. When facing imperfect information, the investors tend to form a learning scheme that encompasses both historical data and prior beliefs. In the variance decomposition framework, the introducing of learning directly impacts the way that return forecasts are revised and consequently the relative component of market volatility based on these forecasts, namely the price movements from revision on future discount rates and those from future cash flows. According to the empirical study in Chapter 1, the former is not necessarily the major driving force of market volatility, which provides an alternative view on what moves stock prices. Learning is modeled and estimated by Bayesian method. Chapter 2 follows the topic in Chapter 1 and studies the role of persistent state variables in return decomposition in order to provide more robust inference on variance decomposition. In Chapter 3 we propose to utilize theoretical constraints to help predict market returns when in sample data is very noisy and creates model uncertainty for the investors. The constraints are also incorporated by Bayesian method. We show in the out-of-sample forecast experiment that models with theoretical constraints produce better forecasts.

Author: Shu Yan
Publisher:
ISBN:
Category : Stock exchanges
Languages : en
Pages : 310

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Author: Christian Funke
Publisher: Springer Science & Business Media
ISBN: 3834998141
Category : Business & Economics
Languages : en
Pages : 123

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Christian Funke aims at developing a better understanding of a central asset pricing issue: the stock price discovery process in capital markets. Using U.S. capital market data, he investigates the importance of mergers and acquisitions (M&A) for stock prices and examines economic links between customer and supplier firms. The empirical investigations document return predictability and show that capital markets are not perfectly efficient.

Author: William N. Goetzmann
Publisher: Oxford University Press
ISBN: 0199881979
Category : Business & Economics
Languages : en
Pages : 568

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Book Description
What is the return to investing in the stock market? Can we predict future stock market returns? How have equities performed over the last two centuries? The authors in this volume are among the leading researchers in the study of these questions. This book draws upon their research on the stock market over the past two dozen years. It contains their major research articles on the equity risk premium and new contributions on measuring, forecasting, and timing stock market returns, together with new interpretive essays that explore critical issues and new research on the topic of stock market investing. This book is aimed at all readers interested in understanding the empirical basis for the equity risk premium. Through the analysis and interpretation of two scholars whose research contributions have been key factors in the modern debate over stock market perfomance, this volume engages the reader in many of the key issues of importance to investors. How large is the premium? Is history a reliable guide to predict future equity returns? Does the equity and cash flows of the market? Are global equity markets different from those in the United States? Do emerging markets offer higher or lower equity risk premia? The authors use the historical performance of the world's stock markets to address these issues.