Search results for "asset pricing"
showing 10 items of 38 documents
The Investment Performance of U.S. Islamic Mutual Funds
2020
Islamic investment funds have become increasingly important because of high demand from many investors, including those outside the Muslim investment community. This article compares the performance and risk sensitivity of Islamic mutual funds in the United States with that of their conventional peers. This article also analyzes the performance of Islamic funds, and compares this performance with that of socially responsible investment (SRI) mutual funds. Capital Asset Pricing Model (CAPM)-based methodology was used for the analysis. The results suggest that over the entire study period (1987&ndash
Risk-Managed Industry Momentum and Momentum Crashes
2016
This is the first paper that investigates Barosso and Santa-Clara’s (2015) risk-managed momentum strategy in an industry momentum setting. We investigate traditional momentum strategies and Novy-Marx (2012) strategy. We also explore the impact of different variance forecast horizons on the average payoffs. We find that risk-managed industry momentum payoffs generate considerably higher returns than plain momentum strategies. Notably, risk-managed payoffs increase linearly as the time window for variance forecasts are contracted which is consistent for all different strategies.
Firm Size and Volatility Analysis in the Spanish Stock Market
2011
In this article, three strongly related questions are studied. First, volatility spillovers between large and small firms in the Spanish stock market are analyzed by using a conditional CAPM with an asymmetric multivariate GARCH-M covariance structure. Results show that there exist bidirectional volatility spillovers between both types of firms, especially after bad news. Second, the volatility feedback hypothesis explaining the volatility asymmetry feature is investigated. Results show significant evidence for this hypothesis. Finally, the study uncovers that conditional beta coefficient estimates within the used model are insensitive to sign and size asymmetries in the unexpected shock re…
Integration and arbitrage in the Spanish financial markets: An empirical approach*
2000
Several authors have introduced different ways to measure integra-tion between financial markets. Most of them are derived from thebasic assumptions about asset prices, like the Law of One Price or ...
UME Y LA INTEGRACIÓN DE LOS MERCADOS DE CAPITALES EUROPEOS: RELEVANCIA DEL TIPO DE CAMBIO Y LA INFLACIÓN
2007
The aim of this paper is to investigate the effects of the European Monetary Union on the hypothesis of an integrated European Capital Market from January 1993 to December 2004. The extent of the period and the use of Fama and MacBeth [1973]'s methodology for estimating a large number of international asset pricing models that includes an Adler and Dumas [1983] model with and without domestic factor make possible to evaluate this hypothesis as a process towards a full integration. However, our results show that the integration is not a uniform process at all times and for all stocks and recedes in the period 2001-04 with the reappearance of a significant domestic risk premium (diversifiable…
Are Momentum Crashes Pervasive Regardless of Strategy? Evidence from the Foreign Exchange Market
2016
This paper studies the option-like behavior of popular momentum strategies implemented in foreign exchange markets. The results confirm those of Daniel and Moskowitz (2013) in finding strong option-like behavior for both momentum measures, based on the cumulative return from 12 and 6 months prior to the formation date to one month prior to the formation date. Surprisingly, there is no such evidence for the popular momentum strategy accounting for a one-month formation period.
Optimal Dynamic Portfolio Risk Management
2016
Numerous econometric studies report that financial asset volatilities and correlations are time-varying and predictable. Over the past decade, this knowledge has stimulated increasing interest in various dynamic portfolio risk control techniques. The two basic types of risk control techniques are: risk control across assets and risk control over time. At present, the two types of risk control techniques are not implemented simultaneously. There has been surprisingly little theoretical study of optimal dynamic portfolio risk management. In this paper, the author fills this gap in the literature by formulating and solving the multi-period portfolio choice problem. In terms of dynamic portfoli…
Minimal Dynamic Equilibria
2018
We define dynamic models as multiperiod models with no static representations and demonstrate that current prevalent asset pricing empirical implementations are inconsistent with dynamic equilibria. Specifically, empirical implementations are misspecified with respect to three essential asset pricing questions (TEQ): dependency on higher moments, complexity of risk premia, and mean-variance efficiency of the “market portfolio” (ability to proxy pricing kernels/SDFs). While we already know that “Merton” models, and their derivatives, differ from static models in all TEQ, we show that this is the case even the “minimal” dynamic equilibria.
Pricing and Hedging GDP-Linked Bonds in Incomplete Markets
2017
We model the super-replication of payoffs linked to a country's GDP as a stochastic linear program on a discrete time and state-space scenario tree to price GDP-linked bonds. As a byproduct of the model, we obtain a hedging portfolio. Using linear programming duality we also compute the risk premium. The model applies to coupon-indexed and principal-indexed bonds, and allows the analysis of bonds with different design parameters (coupon, target GDP growth rate, and maturity). We calibrate for UK and US instruments and carry out a sensitivity analysis of prices and risk premia to the risk factors and bond design parameters. We also compare coupon-indexed and principal-indexed bonds. Results …
On survivor stocks in the S&P 500 stock index
2021
This paper investigates the performance and characteristics of survivor stocks in the S&P 500 index. Using both in-sample and out-of-sample comparisons, survivor stocks outperformed this market index by a considerable margin. Relative to other S&P 500 index companies, survivor stocks tend to be small value stocks that exhibit high profitability and invest conservatively. Surprisingly, survivor stocks tend to be loser stocks with negative exposure to the momentum factor. Further analyses show that the volatility of the survivor stocks portfolio is less exposed to tail risks and responds less to shocks in the innovation process.