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Is Cash-Return Relation Risk Induced?, Chenxi Liu
Is Cash-Return Relation Risk Induced?, Chenxi Liu
Research Collection Lee Kong Chian School Of Business
Corporate cash holding is found to be able to predict stock return. Some scholars attribute this to the association of cash with systematic risk with respect to growth options. Others find that the relation is a mispricing effect. In this paper, I try to test whether the relation between cash and return is driven by systematic risk that captured by cash. The empirical results do not support the risk explanation of cash-return relation. First, the risk loading on CASH factor cannot predict returns, which is not consistent with rational frictionless asset pricing models. Second, CASH factor cannot reflect future GDP …
Macro Disagreement And The Cross-Section Of Stock Returns, Frank Weikai Li
Macro Disagreement And The Cross-Section Of Stock Returns, Frank Weikai Li
Research Collection Lee Kong Chian School Of Business
This paper examines the effects of macro-level disagreement on the cross-section of stock returns. Using forecast dispersion measure from Survey of Professional Forecasters database, I find that when forecast dispersion on macroeconomic factor is high, stocks that have high loadings on that factor earn lower future returns relative to stocks with low loadings and vice versa. This negative relationship between risk premium of macro-factors and macro-level disagreement is robust and exists for a large set of macroeconomic risk factors. These findings are consistent with the model of Hong and Sraer (2015), where high beta stocks are more prone to speculative …