{"title":"CoAnomaly: Correlation Risk in Stock Market Anomalies","authors":"James Tengyu Guo","doi":"10.2139/ssrn.3110008","DOIUrl":"https://doi.org/10.2139/ssrn.3110008","url":null,"abstract":"I propose a simple time-series risk measure in trading stock market anomalies, CoAnomaly, the time-varying average pairwise correlation among 34 anomalies, which helps to explain both the time-series and the cross-sectional anomaly return patterns. Since correlations among underlying assets determine the portfolio variance, CoAnomaly is an important state variable for arbitrageurs who hold diversified portfolios of anomalies to boost their performance. Empirically, I show that, first, CoAnomaly is persistent and forecasts long-run aggregate volatility of the diversified anomaly portfolio. Second, CoAnomaly positively predicts future average anomaly returns in the time series. Third, in the cross-section of these 34 anomaly portfolios, CoAnomaly carries a negative price of risk. These return patterns suggest that arbitrageurs take the time-varying correlation into account and their intertemporal hedging demand plays an important role in setting asset prices.","PeriodicalId":129035,"journal":{"name":"Empirical Asset Pricing","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127116190","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Preference for Dividends and Return Comovement","authors":"A. Hameed, Jing Xie","doi":"10.2139/ssrn.2565277","DOIUrl":"https://doi.org/10.2139/ssrn.2565277","url":null,"abstract":"Stocks that initiate dividends tend to comove more with other dividend-paying stocks and comove less with non-dividend payers. This is also true for: (a) dividend initiations that are motivated by the exogenous 2003 dividend tax cut; and (b) the cash dividend share class of Citizens Utilities (relative to its stock dividend class). We find that flows to dividend prone (averse) mutual funds increase the comovement among dividend-paying (non-dividend paying) stocks. Overall, the evidence supports the proposition that the trading of pro-dividend (dividend-averse) clienteles induces an extra factor in dividend payers (non-payers), beyond those associated with changes in common factors.","PeriodicalId":129035,"journal":{"name":"Empirical Asset Pricing","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-02-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121693096","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Disaggregated Sales and Stock Returns","authors":"Sumit Agarwal, Wenlan Qian, Xin Zou","doi":"10.2139/ssrn.2892184","DOIUrl":"https://doi.org/10.2139/ssrn.2892184","url":null,"abstract":"Using transaction-level credit-card spending from a large U.S. financial institution, we show that disaggregated sales provide accurate and persistent signals of customer demand relevant to a firm’s stock pricing. After controlling for earnings and sales surprises, one interquintile increase in the adjusted customer spending during a firm’s fiscal quarter leads to a 1.5 percentage point increase in the 60-day post–earnings announcement cumulative abnormal return. The predictability concentrates in consumer-oriented firms, especially those relying more on indirect sales distribution channels. We also find a stronger return response to spending from high-FICO-score, high-liquidity, and loyal customers. The transmission speed of disaggregated sales information is slower than that of the earnings information, and small firms or firms far from their end customers exhibit a more delayed price response. Finally, the return implications of adjusted customer spending extend to firms along the production chain. This paper was accepted by Haoxiang Zhu, finance.","PeriodicalId":129035,"journal":{"name":"Empirical Asset Pricing","volume":"12 8","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-09-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120923618","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Investment Shocks and Asset Returns: International Evidence","authors":"Ruchith Dissanayake, Akiko Watanabe, M. Watanabe","doi":"10.2139/ssrn.2845648","DOIUrl":"https://doi.org/10.2139/ssrn.2845648","url":null,"abstract":"We study how investment-specific technology shocks are priced in a large cross section of stocks from 33 countries. The investment premium is generally negative and often significant in developed countries with greater access to capital, better financial institutions, and higher product market competition, while it is largely insignificant or sometimes even significantly positive in emerging markets with opposite characteristics. The investment premium is related to, but not subsumed in, the value premium. Our results underscore the importance of economic development and allocative efficiency in the pricing of technological advances, and help reconcile the conflicting existing evidence from the U.S. market with different sample periods.","PeriodicalId":129035,"journal":{"name":"Empirical Asset Pricing","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-05-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123834480","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Dual-price Integration Risks and Closed-end Fund Premiums","authors":"A. Aboulamer, L. Kryzanowski","doi":"10.2139/ssrn.2139875","DOIUrl":"https://doi.org/10.2139/ssrn.2139875","url":null,"abstract":"In a frictionless world, a closed-end fund’s (CEF’s) premium equals its price minus both its NAVPS (net asset value per share) and present value of the net benefits (PVNB) from liquidity enhancement, managerial abilities after costs, and leverage. The premium can differ further due to frictions resulting from uncertainties about a CEF’s PVNB and its holdings. Complete hedge positions between CEF prices and NAVPS are not possible since their concurrent daily directional changes are not perfectly integrated. We are able to explain over two-thirds of the variation in premiums or their changes for U.S. equity CEFs. As expected, the CEF premium is positively related to liquidity enhancement, CEF performance and net leverage, and negatively related to management fees, gross leverage, cash and bond holdings, and proxies for price equilibrating risks.","PeriodicalId":129035,"journal":{"name":"Empirical Asset Pricing","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-10-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122670186","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Beta Reversal and Expected Returns","authors":"Yexiao Xu, Yihua Zhao","doi":"10.2139/ssrn.2408757","DOIUrl":"https://doi.org/10.2139/ssrn.2408757","url":null,"abstract":"In this paper we show that the failure of the CAPM beta to predict individual stocks' expected returns documented by Fama and French (1992) is largely driven by a small group of stocks with large betas and high idiosyncratic volatilities. These stocks' betas tend to reverse. Therefore, even when the CAPM holds period-by-period, the cross-sectional evidence on market beta is weak at best due to the confounding effect of beta reversal and instability. We further show that such a beta reversal is partly predictable by idiosyncratic volatility. As a result, the current beta estimates of individual stocks can significantly explain the cross-sectional differences in future returns whit a simple control for such a reversal effect. In fact, the market risk premium estimated from cross-sectional regression is close to that of the historical average. All results are robust with respect to different measures of beta and idiosyncratic volatility as well as different subsamples. In addition, we explore several possible causes for the beta reversal phenomenon.","PeriodicalId":129035,"journal":{"name":"Empirical Asset Pricing","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116833528","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Liquidity Risk and Stock Returns: A Return Decomposition Approach","authors":"Shaun A. Bond, Qingqing Chang","doi":"10.2139/ssrn.2148729","DOIUrl":"https://doi.org/10.2139/ssrn.2148729","url":null,"abstract":"We study the effect of innovations in liquidity on stock-return volatility under the return-decomposition framework. Using revisions to equity analyst consensus forecasts to measure cash-flow news directly, we contend that both cash-flow news and expected return news correlate with liquidity shocks, and the cash-flow news component is a nontrivial channel through which liquidity correlates with stock returns. Specifically, we find a positive (decrease) liquidity shock for firms that have positive (negative) cash-flow news and expected-return news. Furthermore, since the correlation between liquidity proxies and stock returns also arise from the association of liquidity proxies with the three stock return components, the R^2 from a regression of returns on liquidity proxies may understate or overstate the importance of liquidity as a source of stock-return variance. Finally, liquidity proxies tend to explain stock returns better during negative market liquidity shocks, but this additional explanatory power comes mostly from the increased correlation between liquidity proxies and cash-flow news, while the correlation between liquidity proxies and unexplained stock return variations does not change with market liquidity conditions.","PeriodicalId":129035,"journal":{"name":"Empirical Asset Pricing","volume":"38 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123778261","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Are Capital Expenditures, R&D, Advertisements and Acquisitions Positive NPV?","authors":"Peter B. Vassallo","doi":"10.2139/ssrn.2139880","DOIUrl":"https://doi.org/10.2139/ssrn.2139880","url":null,"abstract":"Despite evidence on differences in how classes of investments correlate with present and future firm returns (Titman and Xie 2004; Eberhart et al, 2004), the literature does not yet show whether net present values across investment classes, imputed from contemporaneous firm returns, are distinct from the effects of measurement conservatism of assets in place. In this paper, I extend Easton and Pae (2004) to examine how, distinctly from measurement conservatism, investors’ NPV expectations vary across (i) GAAP-expensed and GAAP-capitalized investment classes and (ii) within these classes, across firm-level conditions associated with value/growth, profit/loss and net financial leverage levels. I find that, while NPV’s vary in the order of risk associated with respective investment classes, significant variation in NPV is driven by firm level conditions. These variations relate to other, non-financial information associated with high growth firms (Donelson and Resutek, 2012), greater value in capacity-expanding investments in loss making firms and higher NPV from investments in firms with negative financial leverage. The results in this study will thus assist analysts evaluating NPV from firm-specific investments to control for the influence of measurement conditions of existing assets and better evaluate reliability of investments’ NPV due to variation in firm-level conditions.","PeriodicalId":129035,"journal":{"name":"Empirical Asset Pricing","volume":"105 ","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-05-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"113994228","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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