Spillover effects on the sectoral returns for australian and New Zealand equity markets

In this paper, we examine the return and volatility spillovers, together with the trend spillovers on the sectoral equity returns for Australian and New Zealand markets. We find that the return spillovers of industrial, local and global shocks have a limited effect on Australian and New Zealand sector returns, whereas the volatility spillovers play a significant role on explaining the volatility of sector equity indices. Furthermore, we discover that the volatility spillover effects of the global and industrial shocks are greater in magnitude for explaining the volatility of the Australian sectors than those of New Zealand, particularly basic materials, oil and gas, technology and telecom sectors. By employing the trend spillover model, we find that the volatility spillover effects of global sector indices have been increasing over the volatility of the Australian sectoral returns until now. This finding proposes that Australian sector equity market is more integrated with the world than the New Zealand counterpart.     

中国股市的最大值效应

本文证实我国股市的投资者们长期存在对股票历史业绩的反应过度现象。我们发现历史上拥有最高收益率的股票在之后业绩都表现不佳。其主要原因是我国股市的投资者们在做投资选择时都遵循一条简单的规则:即在其他条件都相同的情况下,选择拥有最高的历史收益率的股票进行投资。集中投资使拥有最高的历史收益率的股票被过高评价,导致其后来的业绩表现要比那些拥有较低历史收益率的股票差。我们称之为"最大值效应"。通过使用Fama and Macbeth(1973)横断面回归分析方法,我们确认了"最大值效应"要比CAPM理论,Blitz and Pim van Vliet(2007)发现的"波动性效应"等更为有效地解释我国股市横断面股票收益率。     

CAPM模型在股票价格分析中的实证研究

对经典的CAPM模型进行变化后,形成一个一元线性回归模型,再从上海证券交易所A股中随机抽取一支股票进行回归分析,发现CAPM是有效的,且个股收益率与组合收益呈较明显的正相关关系,同时,通过对截距项20分析,比较股票的预期收益率与实际收益率的大小,分析股价的走势,据此指导中小投资者进行投资决策。     

Liquidity and asset pricing: Evidence from the Chinese stock markets

We introduce a novel two-factor model, incorporating market and liquidity factors, which outperforms the CAPM and Fama–French factor models when applied to stock market returns in Shanghai and Shenzhen over 2000–2019. We compute the liquidity factor as the return on a liquidity-mimicking portfolio, which we construct simultaneously using two measures of liquidity (one of them capturing liquidity’s trading-quantity dimension, and the other associated with its price-impact dimension). Unlike the CAPM and Fama–French factor models, the advocated two-factor model is able to account for numerous return anomalies, such as size, book-to-market ratio, earnings-to-price ratio, cash-flow-to-price ratio, return-on-equity, and volatility. The model’s performance is similar when applied separately to the Shanghai and Shenzhen stock markets. Furthermore, it fares similarly over the 1994–2004 and 2005–2019 sub-periods. This result is somewhat surprising, because liquidity seems likely to have been substantially lower over 1994–2004, as the Chinese markets were noticeably smaller, and the critical market reform aimed at eliminating non-tradable shares by the end of 2006 did not occur until 2005.     

CAPM模型在上海股票市场的有效性检验

根据资本资产定价模型(CAPM),从上海A股市场随机抽取100支股票,计算它们的收益率,选择上证综合指数为市场组合的市场指数,并利用双层回归分析方法对2007年1月1日至2011年12月31日这段时间的100支股票进行实证检验。虽然很多国外研究表明,CAPM模型在一定程度上能够解释市场收益,并在资产估价、资本预算、投资风险分析方面已经得到了广泛应用,同时也有利于投资者构建最优的证券投资组合,但本文实证研究结果发现,CAPM模型并不适合中国的股票市场,股票预期收益率和系统风险之间不仅不存在正相关的关系,而且也不存在线性关系,除了系统风险外,非系统风险在解释股票收益上也具有一定的作用。     

Risk and return in the Tehran stock exchange

This paper analyzes market index returns in the Tehran stock exchange (TSE) within the context of three variants of the Capital Asset Pricing Model: the static international; the constant-parameter intertemporal; and a Markov-switching intertemporal CAPM, which allows for time-varying degree of integration with regional and international equity markets. We find that TSE returns are CAPM-efficient at monthly frequency with respect to several international market indices. Moreover, we find evidence in support of international integration of the TSE with respect to international markets. In addition, we conduct an extensive investigation for the direction of causality between TSE returns, international market index returns, and those in neighboring countries.     

Tests of international CAPM with time-varying covariances

We perform maximum-likelihood estimation of a model of international asset pricing based on CAPM. We test the restrictions imposed by CAPM against a more general asset pricing model. The ‘betas’ in our CAPM vary over time as the supplies of assets change and as the conditional covariances or returns on those assets change. We let the covariances change over time as a function of macroeconomic data, and an alternative model allows the covariances to follow a multivariate ARCH process. We also can identify a modified CAPM model with measurement error. We find that the estimated CAPM performs much better when variances are not constant over time. Nonetheless, CAPM is rejected in favour of the lessrestricted model of asset pricing.     

The stock performance of America's 100 Best Corporate Citizens

We consider the stock performance of America's 100 Best Corporate Citizens following the annual survey by Business Ethics. We examine both possible short-term announcement effects around the time of the survey's publication, and whether longer-term returns are higher for firms that are listed as good citizens. We find some evidence of a positive market reaction to a firm's presence in the Top 100 firms that are made public, and that holders of the stock of such firms earn small abnormal returns during an announcement window. Over the year following the announcement, companies in the Top 100 yield negative abnormal returns of around 3%. However, such companies tend to be large and with stocks exhibiting a growth style, which existing studies suggest will tend to perform poorly. Once we allow for these firm characteristics, the poor performance of the highly rated firms declines. We also find companies that are newly listed as good citizens and companies in the Top 100 but outside the S&P 500 can provide considerable positive abnormal returns to investors, even after allowing for their market capitalization, price-to-book ratios, and sectoral classification.     

Are the profitability and investment factors valid ICAPM risk factors? Pre-1963 evidence

We empirically evaluate whether the profitability and investment factors from Novy-Marx (2013) and Fama and French (2015, 2018) are compatible with Merton’s (1973) intertemporal CAPM (ICAPM) framework in the pre-1963 period. We show that: (i) the covariance risk price estimates of the profitability factors are positive and statistically significant, which indicates that they have explanatory power with respect to the cross-section of stock returns; (ii) the investment factors carry insignificant covariance risk prices and are therefore not valid ICAPM risk factors; and (iii) the profitability factors forecast the first moment of the aggregate stock return and economic activity with the correct sign, which is consistent with their positive covariance risk price estimates and satisfies the sign restrictions associated with the ICAPM.     

Infectious diseases tracking and sectoral stock market returns: A quantile regression analysis

This paper investigates the relationship between changes in the newspaper-based infectious diseases tracking index (ITI) of Baker et al. (2020) and sectoral stock market returns in the US. Our results spanning the period 1985:01 to 2020:03 reveal the presence of a negative (positive) relationship between returns and ITI at lower (higher) return quantiles (representing different market conditions) in a majority of the sectors. For the health care sector, this relationship is negative at all quantiles. Interestingly, inclusion of the COVID-19 period in the sample data leads to the detection of a stronger relationship for smaller quantiles across all sectors. An asymmetric relationship between returns and the ITI is witnessed across different market conditions for the Consumer Staples, Healthcare, Industrial and Technology sectors. Results from a rolling regression uncover differences in the magnitudes of responses to various infectious diseases over time. Our results carry important implications regarding investment strategies for US sectoral returns in the presence of news relating to infectious diseases.     

基于极值分布理论的VaR与ES度量

本文应用极值分布理论对金融收益序列的尾部进行估计,计算收益序列的在险价值VaR和预期不足ES来度量市场风险。通过伪最大似然估计方法估计的GARCH模型对收益数据进行拟合,应用极值理论中的GPD对新息分布的尾部建模,得到了基于尾部估计产生收益序列的VaR和ES值。采用上证指数日对数收益数据为样本,得到了度量条件极值和无条件极值下VaR和ES的结果。实证研究表明:在置信水平很高(如99%)的条件下,采用极值方法度量风险值效果更好。而置信水平在95%下,其他方法和极值方法结合效果会很好。用ES度量风险能够使我们了解不利情况发生时风险的可能情况。     

Land of addicts? an empirical investigation of habit‐based asset pricing models

This paper studies the ability of a general class of habit‐based asset pricing models to match the conditional moment restrictions implied by asset pricing theory. We treat the functional form of the habit as unknown, and estimate it along with the rest of the model's finite dimensional parameters. Using quarterly data on consumption growth, assets returns and instruments, our empirical results indicate that the estimated habit function is nonlinear, that habit formation is better described as internal rather than external, and the estimated time‐preference parameter and the power utility parameter are sensible. In addition, the estimated habit function generates a positive stochastic discount factor (SDF) proxy and performs well in explaining cross‐sectional stock return data. We find that an internal habit SDF proxy can explain a cross‐section of size and book‐market sorted portfolio equity returns better than (i) the Fama and French ( 1993 ) three‐factor model, (ii) the Lettau and Ludvigson ( 2001b ) scaled consumption CAPM model, (iii) an external habit SDF proxy, (iv) the classic CAPM, and (v) the classic consumption CAPM. Copyright © 2009 John Wiley & Sons, Ltd.     

Individual stock sentiment beta and stock returns

Using the data in Chinese stock market, we measure the individual stock sentiment beta, which is defined as the sensitivity of individual stock returns to the individual stock sentiment changes. We demonstrate that stocks in the highest individual stock sentiment beta portfolio have significantly higher excess returns, CAPM alpha, Fama-French three-factor alpha and Fama-French five-factor alpha. Besides, we find that the high individual stock sentiment beta stocks are smaller, younger, more volatile stocks with higher price and higher market beta. After controlling for firm characteristic, the returns of High-Low individual stock sentiment beta portfolios are still significantly positive. Moreover, we show the effect of the individual stock sentiment beta on stock returns is positive and significant in different stock markets, in different sample periods, and in bull and bear market. Besides, the results of the Bayes-Stein individual stock sentiment beta are still stable.     

The role of the seller’s stock performance in the market reaction to divestiture announcements

Divestitures have the potential to create shareholder value. However, the extent of the market reaction should depend on the likelihood of finding more valuable uses for the divested assets or the ability on the part of the seller to eliminate negative synergies. We hypothesize that strong performers have less scope to achieve substantial improvements compared to poorly performing firms. Using the seller’s stock return in excess of the market return in the 1-year and 2-year periods preceding the divestiture announcement to expose the divesting firm’s inefficient use of its assets, we show that the market reaction to divestiture announcements is significantly higher for underperforming firms. The difference in abnormal returns can be as high as 4 %. In contrast, none of the accounting-based variables that have been used in previous studies are found to be significantly related to the announcement returns. These results suggest that the firm’s stock performance is a more useful indicator of the wealth effect associated with divestitures.     

The non-relevance of the elusive holy grail of asset pricing tests: The “true” market portfolio does not alter CAPM validity conclusions

Empirical evaluations of CAPM usually attach a caveat that rejection is conditional on the choice of market proxy. We explore the criticality of the proxy choice disclaimer. Using different proxies and comprehensive simulations of the unobserved “true” market in Fama–MacBeth tests of CAPM, we find that the significance (t-statistics) corresponding to betas remain consistently unaltered, even if the proxy is a small fraction of or has a low correlation with the true market. The constancy of t-statistics persists in a simulated true-CAPM world as well: if CAPM is indeed valid, the choice of proxy is unlikely to reject it erroneously. Identity of the elusive true market portfolio and the choice of representative proxy cannot overturn conclusions on validity of CAPM based on Fama–MacBeth tests. Roll’s Critique, incontrovertible in theory, may be quite forgiving in practice – CAPM cannot be resurrected by a “closer” approximation of the elusive true market portfolio when it has commonly been rejected.     

Risk and return: CAPM and CCAPM

Can consumption growth risk (or consumption beta) serve a better measure of risk than market beta? This paper answers this question by testing and comparing the performance of the traditional Capital Asset Pricing Model (CAPM) and consumption-based CAPM (CCAPM) across seven financial market sub-sectors in the emerging Taiwan stock market. The empirical performance of the CAPM is encouraging. The relationship between stock returns and beta is statistically significant and the coefficient of determination of the regression is high across all of seven industry sub-sectors. In comparison, the CCAPM fails to explain the Taiwan stock market although the consumption beta should offer a better measure of systematic risk theoretically.     

A Respecified Fama French Three‐Factor Model for the New European Union Member States

This study uses factor models to explain stock market returns in the Eastern European (EE) countries that joined the European Union (EU) in 2004. In line with other studies, we find that the market value of equity component in the Fama French (1993) three‐factor model performs poorly when applied to our emerging markets dataset. We propose a significant amendment to the standard three‐factor model by replacing the market value of equity factor with a term that proxies for accounting manipulation. We show that our three‐factor model is able to explain returns in the EE EU nations significantly better than the Fama French (1993) three‐factor model, hereby offering an alternative model for use in the numerous markets in which previous studies have found little correlation between market value of equity and equity returns.     

The effect of ESOP adoptions on corporate performance: are there really performance changes?

Employee Stock Ownership Programs (ESOPs) have long been promoted as a motivational tool: employees become profit‐minded owners. Latterly, however, more ESOPs are being used as part of a takeover defense: here the ESOPs main purpose is to put more company stock in friendly hands—the employees—who, like existing management, could suffer layoffs, etc. in a hostile takeover. We find that, as a group, only the takeover‐related ESOPs are associated with increased leverage (itself a takeover defense). Non‐target firms show no long‐term increase in debt‐to‐assets. We find little evidence to support the motivation hypothesis: while actual labor costs are lower for ESOP firms, after industry‐adjusting they tend to be unaffected or higher. We find that a few measures of firm financial performance [return‐on‐equity (ROE), return‐on‐assets (ROA), net profit margin (NPM)] do improve significantly, but this appears to be largely a short‐term effect. Industry‐adjusted holding period returns appear to be unaffected by the ESOP; however, ESOP firms that leverage show evidence of long‐term market underperformance. We conclude that ESOPs provide, at best, only a short‐term boost to corporate performance. Copyright © 2000 John Wiley & Sons, Ltd.     

Phase transition in the S&P stock market

We analyze the returns of stocks contained in the Standard & Poor’s 500 index from 1987 until 2011. We use covariance matrices of the firms’ returns determined in a time windows of several years. We find that the eigenvector belonging to the leading eigenvalue (the market) exhibits a phase transition. The market is in an ordered state from 1995 to 2005 and in a disordered state after 2005. We can relate this transition to an order parameter derived from the stocks’ beta and the trading volume. This order parameter can also be interpreted within an agent-based model.     

Forecasting multivariate realized stock market volatility

We present a new matrix-logarithm model of the realized covariance matrix of stock returns. The model uses latent factors which are functions of lagged volatility, lagged returns and other forecasting variables. The model has several advantages: it is parsimonious; it does not require imposing parameter restrictions; and, it results in a positive-definite estimated covariance matrix. We apply the model to the covariance matrix of size-sorted stock returns and find that two factors are sufficient to capture most of the dynamics.