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Author: Shabir Ahmad Hakim Publisher: ISBN: Category : Capital assets pricing model Languages : en Pages : 678
Book Description
Emerging markets are associated with developing economies and are structurally different from the developed markets. They offer higher expected returns as they are experiencing higher growth rates and potential for diversifying the risk in global portfolios as they are partially integrated with the developed markets. However, the structural differences coupled with partial integration limit the capability of the asset pricing models, originally designed for the developed markets, to capture risk and return dynamics of the assets in these markets and necessitate customization of the models to the local settings. Many asset pricing studies undertaken in this direction supplement the factors in developed market models with the factors that are unique to the emerging markets. However, the models have limited scope in explaining asset returns due to limited explanatory power of the factors included. This study proposes a multifactor asset pricing model with nine explanatory factors, which include returns on the local and global market portfolios, exchange rate, and returns on six mimicking portfolios that proxy for the common sources of risks associated with size, book to market value of equity, market liquidity, leverage, quality of earnings, and asset liquidity of firms. The last three factors in the model have not been tested in the emerging markets; among these, asset liquidity is introduced as an explanatory factor in asset pricing in this study. The model is tested in seven emerging markets, namely China, India, Indonesia, Malaysia, Thailand, South Africa, and Brazil using ten-year monthly data on non-financial firms over period of January 2004 to December 2013. Generalized method of moments (GMM) is applied for data analysis and model testing. The findings of the study reveal that the local market portfolio is the most dominant factor in all the markets. It subsumes the effects of the global market portfolio and the exchange rate in most of the markets. In addition, consistent cross-country behaviour of size related factor is observed in explaining returns on small and medium portfolios, and of book to market value of equity related factor in explaining returns on high book to market value portfolios. Other factors in the model exhibit different behaviours in different markets indicating presence of idiosyncrasies in the common sources of risks that drive returns in these markets. The newly introduced asset liquidity factor has strong impact on stock returns in four markets: India, Indonesia, Malaysia and South Africa. Furthermore, the new to emerging markets factors leverage and quality of earnings have noticeable influence on stock returns in two markets each; leverage in India and Malaysia, and quality of earnings in China and Brazil. The observed behaviour of the model in the markets studied mirrors the behaviour expected of asset pricing models in emerging markets, which are partially integrated with one another and are in different stages of economic lifecycle.
Author: Shabir Ahmad Hakim Publisher: ISBN: Category : Capital assets pricing model Languages : en Pages : 678
Book Description
Emerging markets are associated with developing economies and are structurally different from the developed markets. They offer higher expected returns as they are experiencing higher growth rates and potential for diversifying the risk in global portfolios as they are partially integrated with the developed markets. However, the structural differences coupled with partial integration limit the capability of the asset pricing models, originally designed for the developed markets, to capture risk and return dynamics of the assets in these markets and necessitate customization of the models to the local settings. Many asset pricing studies undertaken in this direction supplement the factors in developed market models with the factors that are unique to the emerging markets. However, the models have limited scope in explaining asset returns due to limited explanatory power of the factors included. This study proposes a multifactor asset pricing model with nine explanatory factors, which include returns on the local and global market portfolios, exchange rate, and returns on six mimicking portfolios that proxy for the common sources of risks associated with size, book to market value of equity, market liquidity, leverage, quality of earnings, and asset liquidity of firms. The last three factors in the model have not been tested in the emerging markets; among these, asset liquidity is introduced as an explanatory factor in asset pricing in this study. The model is tested in seven emerging markets, namely China, India, Indonesia, Malaysia, Thailand, South Africa, and Brazil using ten-year monthly data on non-financial firms over period of January 2004 to December 2013. Generalized method of moments (GMM) is applied for data analysis and model testing. The findings of the study reveal that the local market portfolio is the most dominant factor in all the markets. It subsumes the effects of the global market portfolio and the exchange rate in most of the markets. In addition, consistent cross-country behaviour of size related factor is observed in explaining returns on small and medium portfolios, and of book to market value of equity related factor in explaining returns on high book to market value portfolios. Other factors in the model exhibit different behaviours in different markets indicating presence of idiosyncrasies in the common sources of risks that drive returns in these markets. The newly introduced asset liquidity factor has strong impact on stock returns in four markets: India, Indonesia, Malaysia and South Africa. Furthermore, the new to emerging markets factors leverage and quality of earnings have noticeable influence on stock returns in two markets each; leverage in India and Malaysia, and quality of earnings in China and Brazil. The observed behaviour of the model in the markets studied mirrors the behaviour expected of asset pricing models in emerging markets, which are partially integrated with one another and are in different stages of economic lifecycle.
Author: Ms.Elaine Karen Buckberg Publisher: International Monetary Fund ISBN: 145184171X Category : Business & Economics Languages : en Pages : 25
Book Description
This paper presents a new theory of asset pricing intended to address why other developing country equity markets responded so strongly to the Mexican devaluation, while the world’s major stock markets were unmoved. This phenomenon can be explained if investors follow a two-step portfolio allocation process, first determining what share of their portfolio to invest in developing countries, then allocating those funds across the emerging markets. For 12 of 13 markets studied, the one-factor CAPM is rejected in favor of a two-factor asset pricing model, including both a broad emerging markets portfolio and the global market portfolio.
Author: Publisher: ISBN: 9789741427550 Category : Capital assets pricing model Languages : en Pages : 182
Book Description
Direct empirical evidence on the relationship between the asset pricing model parameters and infrequent trading in emerging markets seems sparse at best. This thesis provides empirical evidence on the potential impact of infrequent trading on the estimated asset pricing model parameters in Thailand. As a comparison sample, Singaporean data are also employed. Three main empirical results are found in this thesis. First, there is a pattern indicating that the alphas without adjusting for infrequent trading (unadjusted alphas) may be upwardly biased and the betas without adjusting for infrequent trading (unadjusted betas) may be downwardly biased in both the Thai and Singaporean markets. Second, although the differences between the unadjusted alphas and betas and the adjusted alphas and betas are statistically insignificant, the differences between the unadjusted alphas and the adjusted alphas are economically significant. Third, the serial correlation problem in portfolio returns is alleviated after adjusting for infrequent trading. Hence, it seems worthwhile to adjust for the impact of infrequent trading on the asset pricing model parameters in both Thailand and Singapore.
Author: Chris Bilson Publisher: ISBN: Category : Languages : en Pages : 27
Book Description
This paper explores and tests two multi-factor asset pricing models in an international context. One model focuses only on local risk factors and therefore assumes that the market is completely segmented. The other model focuses only on global risk factors and assumes that the market is fully integrated. The models incorporate time-variation in both the risk exposures and risk premia. The models are applied in cross-section to a range of developed and emerging markets so that varying levels of integration are examined. Expected returns are formed using time-varying estimates of risk premia that allow for out-of-sample testing. Using a range of performance metrics, the findings show that returns in developed markets are better approximated by a global pricing model, whereas returns in emerging markets are better represented by a local pricing model. These results are found to be generally robust to a range of research design issues.
Author: Lado Beridze Publisher: Nova Publishers ISBN: 9781600218507 Category : Business & Economics Languages : en Pages : 378
Book Description
This book presents recent significant research dealing the economics of emerging markets. The term emerging markets is commonly used to describe business and market activity in industrialising or emerging regions of the world. The term is sometimes loosely used as a replacement for emerging economies, but really signifies a business phenomenon that is not fully described by or constrained to geography or economic strength; such countries are considered to be in a transitional phase between developing and developed status. Examples of emerging markets include China, India, Mexico, Brazil, much of Southeast Asia, countries in Eastern Europe, parts of Africa and Latin America. An emerging market is sometimes defined as "a country where politics matters at least as much as economics to the markets."
Author: Nida Shah Publisher: ISBN: Category : Languages : en Pages : 31
Book Description
This study tests the validity of asset pricing model conditional on up and down market for emerging market of Pakistan. The results indicate that when emerging market undergoes negative market excess return, basic capital asset pricing model is inaccurate to predict stock returns. Although the conditional asset pricing model accurately predicts the risk-return trade off with beta as sole determinant of stock returns when there is up market, however yet it is significantly variant during down market where significant impact of residuals is evinced on stock returns. The market excess returns of up and down markets are also found asymmetric.
Author: James W. Kolari Publisher: Springer Nature ISBN: 3030651975 Category : Business & Economics Languages : en Pages : 326
Book Description
This book proposes a new capital asset pricing model dubbed the ZCAPM that outperforms other popular models in empirical tests using US stock returns. The ZCAPM is derived from Fischer Black’s well-known zero-beta CAPM, itself a more general form of the famous capital asset pricing model (CAPM) by 1990 Nobel Laureate William Sharpe and others. It is widely accepted that the CAPM has failed in its theoretical relation between market beta risk and average stock returns, as numerous studies have shown that it does not work in the real world with empirical stock return data. The upshot of the CAPM’s failure is that many new factors have been proposed by researchers. However, the number of factors proposed by authors has steadily increased into the hundreds over the past three decades. This new ZCAPM is a path-breaking asset pricing model that is shown to outperform popular models currently in practice in finance across different test assets and time periods. Since asset pricing is central to the field of finance, it can be broadly employed across many areas, including investment analysis, cost of equity analyses, valuation, corporate decision making, pension portfolio management, etc. The ZCAPM represents a revolution in finance that proves the CAPM as conceived by Sharpe and others is alive and well in a new form, and will certainly be of interest to academics, researchers, students, and professionals of finance, investing, and economics.
Author: Wolfgang Bessler Publisher: Routledge ISBN: 1317979788 Category : Business & Economics Languages : en Pages : 414
Book Description
This innovative volume comprises a selection of original research articles offering a broad perspective on various dimensions of asset management in an international capital market environment. The topics covered include risk management and asset pricing models for portfolio management, performance evaluation and performance measurement of equity mutual funds as well as the wide range of bond portfolio management issues. Asset Management and International Capital Markets offers interesting new insights into state-of-the-art asset pricing and asset management research with a focus on international issues. Each chapter makes a valuable contribution to current research and literature, and will be of significant importance to the practice of asset management. This book is a compilation of articles originally published in The European Journal of Finance.
Author: Shabir Ahmad Hakim
Author: Shabir Ahmad Hakim
Author: Javed Iqbal (Ph.D.)
Author: Ms.Elaine Karen Buckberg
Author: Michael Hasler
Author: 
Author: Chris Bilson
Author: Lado Beridze
Author: Nida Shah
Author: James W. Kolari
Author: Wolfgang Bessler