Business Commons^™

Costly Arbitrage And The Lead-Lag Structure Between Value And Glamour Stocks, Meng Li

Theses and Dissertations in Business Administration

Motivated by the findings of Lo and Mackinlay (1990) that size premium can be partially attributed to the lead-lag relation between the returns of large stocks and those of small stocks, in this thesis we hypothesize that a possible lead-lag structure between value and glamour returns can partially explain the value premium anomaly.

The thesis consists of three chapters. Chapter I documents a pronounced lead-lag structure between value and glamour stocks: the glamour stocks lead value stocks in terms of both mean returns and residual volatilities, suggesting that value stocks delay in price adjustment to new information. To further explore …

Termination Risk And Managerial Risk Taking, Atreya Chakraborty, Shahbaz A. Sheikh, Narayanana Subramanian

Atreya Chakraborty

We test the hypothesis that managers who face a high termination risk make less risky investments than the managers who face a low termination risk. A 10% increase in our measure of termination risk is associated with a 5%–23% decline in stock returns volatility for the median firm in our sample. We also find that for CEOs who are more likely to be fired in the event of investment failure, the inhibiting effect of termination risk appears to offset the positive effect of convexity of managerial compensation on managerial risk taking. These results are robust to alternative definitions of forced …

The Effect Of Survey-Based Sentiment Measures On The Predictability And Volatility Of Stock Returns Conditioned On The Payout Yield And Issue Yield, Darryl Philip Samsell

Theses and Dissertations in Business Administration

Survey-based sentiment indexes from the American Association of Individual Investors, Investors' Intelligence, and the Yale University International Center for Finance show strong in-sample monthly return predictability and are strong factors in explaining the cross-sectional variation in monthly returns and in explaining the excess volatility in returns beyond that explained by cash flow fundamentals proxied by the payout yield and the issue yield from Boudoukh, et al. (2007). These finding are robust to the use of numerous methods of sentiment variable computation. Sentiment is a more significant factor during the period from January 1997 to December 2005 when U.S. stock valuations …