Author: Shmuel Kandel (deceased)
Publisher:
ISBN:
Category :
Languages : en
Pages : 41
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Book Description
The predictability of monthly stock returns is investigated from the perspective of a risk-averse investor who uses the data to update initially vague beliefs about the conditional distribution of returns. The optimal stocks-versus-cash allocation of the investor can depend importantly on the current value of a predictive variable, such as dividend yield, even though a null hypothesis of no predictability might not be rejected at conventional significance levels. When viewed in this economic context, the empirical evidence indicates a strong degree of predictability in monthly stock returns.
Author: Shmuel Kandel
Publisher:
ISBN:
Category : Asset allocation
Languages : en
Pages : 50
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Book Description
The predictability of monthly stock returns is investigated from the perspective of a risk-averse investor who uses the data to update initially vague beliefs about the conditional distribution of returns. The optimal stocks-versus-cash allocation of the investor can depend importantly on the current value of a predictive variable, such as dividend yield, even though a null hypothesis of no predictability might not be rejected at conventional significance levels. When viewed in this economic context, the empirical evidence indicates a strong degree of predictability in monthly stock returns.
Author: Shmuel Kandel
Publisher:
ISBN:
Category :
Languages : en
Pages : 39
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Book Description
Author: Walter Boudry
Publisher:
ISBN:
Category :
Languages : en
Pages : 184
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Book Description
Author: John Y. Campbell
Publisher: OUP Oxford
ISBN: 019160691X
Category : Business & Economics
Languages : en
Pages : 272
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Book Description
Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Author: Wayne Ferson
Publisher: MIT Press
ISBN: 0262039370
Category : Business & Economics
Languages : en
Pages : 497
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Book Description
An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.
Author: Zhong-guo Zhou
Publisher:
ISBN:
Category : Capital assets pricing model
Languages : en
Pages : 252
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Book Description
Author: Arthur Ritter
Publisher: GRIN Verlag
ISBN: 3656968926
Category : Business & Economics
Languages : en
Pages : 21
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Book Description
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: Lea Rebecca Cederstrand
Publisher:
ISBN:
Category :
Languages : en
Pages : 102
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Book Description
New financial theory suggests that stock return predictability stems from a counter cyclical variation in expected return. Such findings provide a case for active management. This study investigates how investors might capitalize on predictability through short-term country allocation in emerging equity markets. This type of active management is a sub category of Global Tactical Asset Allocation. The appeal of emerging market equity investment is analyzed from a general and a country allocation perspective. It is found, that there is a high scope for diversification benefits and for profit through active management due to low levels of correlation. As emerging markets develop co-movement increases but alignment with developed markets is curbed by the fact that the latter also move more in tandem over time. As such, benefits can be expected to persist for a while. Successful country allocation relies on good return forecasts. The predictive ability of 8 conditioning variables is studied. It appears that output scaled by prices, dividendprice ratios, and price-earnings ratios are the best predictors of return. Inflation and short term interest rates exhibit some predictive ability and there is weak evidence for mean reversion. However, no predictive ability is found using three and six months momentum. Multivariate prediction models are created and used for country allocation. It is problematic to base the construction of such models on the overall evidence of predictability because there is not sufficient commonality in the factors that drive returns. Country allocation based on general prediction models does not generate a higher return than a market capitalization weighted benchmark. It is concluded, that the best prediction models include different conditioning information for every country. Allocation based on such country specific models offers a higher return than the general approach. However, a market capitalization weighted portfolio is still the better
Author: Jacob Boudoukh
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Data on the portfolio weights of asset allocators allows us to address the following two questions: (i) can market timers time markets? and, if so, (ii) can they predict returns over and above predetermined predictive economic variables? A priori, if no evidence of market timing ability can be detected in the portfolio weight changes, further doubt is casted on predictability. Conversely, documenting a link between the shifts in the weights of asset allocators and predetermined variables reinforces the notion of predictability. Moreover, if the information in portfolio weight changes can be shown to subsume the set of predetermined variables commonly used, this could be interpreted as evidence of nonlinearity and/or nonstationarity, better captured by rational learners in the marketplace than by econometricians. The evidence is largely mixed. While many of the point estimates point in the direction of predictability of excess returns, the estimates are most often statistically insignificant. The inference is, hence, critically dependent on one's priors.
