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Articles 1 - 11 of 11
Full-Text Articles in Portfolio and Security Analysis
Forecasting Variance Swap Payoffs, Jonathan Dark, Xin Gao, Thijs Van Der Heijden, Federico Nardari
Forecasting Variance Swap Payoffs, Jonathan Dark, Xin Gao, Thijs Van Der Heijden, Federico Nardari
WCBT Faculty Publications
We investigate the predictability of payoffs from selling variance swaps on the S&P500, US 10-year treasuries, gold, and crude oil. In-sample analysis shows that structural breaks are an important feature when modeling payoffs, and hence the ex post variance risk premium. Out-of-sample tests, on the other hand, reveal that structural break models do not improve forecast performance relative to simpler linear (or state invariant) models. We show that a host of variables that had previously been shown to forecast excess returns for the four asset classes, contain predictive power for ex post realizations of the respective variance risk premia as …
Co-Jumps, Co-Jump Tests, And Volatility Forecasting: Monte Carlo And Empirical Evidence, Weijia Peng, Chun Yao
Co-Jumps, Co-Jump Tests, And Volatility Forecasting: Monte Carlo And Empirical Evidence, Weijia Peng, Chun Yao
WCBT Faculty Publications
This study classifies jumps into idiosyncratic jumps and co-jumps to quantitatively identify systematic risk and idiosyncratic risk by utilizing high-frequency data. We found that systematic risk occurs more frequently and has larger magnitudes than the idiosyncratic risk in an individual asset, which indicates that volatilities from one sector are largely derived from the contagious effect of other sectors. We further investigated the importance of idiosyncratic jumps and co-jumps to predict the sector-level S&P500 exchange-traded fund (ETF) volatility. It was found that the predictive content of co-jumps is higher than that of idiosyncratic jumps, suggesting that systematic risk is more informative …
Do Institutional Investors Exploit Market Anomalies? New Evidence From Alternative Mutual Funds, Xin Gao, Ying-Chih Wang
Do Institutional Investors Exploit Market Anomalies? New Evidence From Alternative Mutual Funds, Xin Gao, Ying-Chih Wang
WCBT Faculty Publications
This paper investigates the anomaly trading behavior of a sample of mutual funds mimicking hedge fund strategies, namely alternative mutual funds (AMFs), based on both of their long and short equity positions. We document that AMFs trade on anomalies by buying underpriced stocks and short-selling overpriced peers. While AMFs’ buys and sells based on their long positions do not generate superior performance, their short-selling and covering activity based on their short positions significantly negatively predicts future abnormal returns. However, this predictability is mainly attributed to size and the nine anomaly characteristics considered. Overall, the results suggest that AMFs are sophisticated …
The Value Perspective: The Case Of Warren Buffet And His Investment Behavior Towards Apple, Walmart And Amazon, Shanhong Wu, Kermit Kuehn, Jing Jiang
The Value Perspective: The Case Of Warren Buffet And His Investment Behavior Towards Apple, Walmart And Amazon, Shanhong Wu, Kermit Kuehn, Jing Jiang
WCBT Faculty Publications
In this paper, we use metrics of Ben Graham’s value investing principle to examine the actions taken by Warren Buffet toward three prominent stocks: Amazon, Apple and Walmart. We find that decisions of investment/dis-investment and not-investment by Buffet toward the stocks are largely in line with Graham’s view on value investing. This paper provides in-depth analysis of value for three stocks and relates to research on the book-to-market anomaly in the finance literature.
Market Risk And Market-Implied Inflation Expectations, Lucjan T. Orlowski, Carolyne Cebrian Soper
Market Risk And Market-Implied Inflation Expectations, Lucjan T. Orlowski, Carolyne Cebrian Soper
WCBT Faculty Publications
We examine interactions between market risk and market-implied inflation expectations. We argue that these interactions are asymmetric and varied in time. Specifically, market risk becomes elevated by expectations of either very low or high expected inflation. Market risk does not react to expectations of moderate, stable inflation. In our analysis, market risk is proxied by VIX and market-implied inflation expectations are reflected by five- and ten-year breakeven inflation. We use daily data for 5 and 10 year breakeven inflation and VIX for the sample period January 3, 2003 – January 24, 2019 for empirical testing. We employ asymptotic VAR, multiple …
Institutional Shareholding And Information Content Of Dividend Surprises: Re-Examining The Dynamics In Dividend-Reappearance Era, Abu S. Amin, Shantanu Dutta, Samir Saadi, Premal P. Vora
Institutional Shareholding And Information Content Of Dividend Surprises: Re-Examining The Dynamics In Dividend-Reappearance Era, Abu S. Amin, Shantanu Dutta, Samir Saadi, Premal P. Vora
WCBT Faculty Publications
We examine the role of institutional investors’ investment horizon on the information content associated with dividend announcement surprises in the “dividend-reappearance era”. We find that the presence of institutional investors negatively affects the announcement period cumulative abnormal return (CAR), which suggests that institutional investors reduce information content of dividend announcements. This result is primarily driven by the fact that institutional investors, especially the not-short-horizon investors, do not prefer dividend surprises – which leads to lower announcement period CAR. We do not find support for institutional investors’ informed trading argument. Our study reveals that in order to understand the dynamics between …
From Pit To Electronic Trading: Impact On Price Volatility, Lucjan T. Orlowski
From Pit To Electronic Trading: Impact On Price Volatility, Lucjan T. Orlowski
WCBT Faculty Publications
This paper investigates the dynamics of price volatility and trading volume of 10-year U.S. Treasury note futures within the context of transition from pit to electronic trading. The analysis is conducted over four discernible phases of futures trading evolution: the pit-only phase, the leap to electronic trading, and the electronic trading dominant phase, which is divided further into two periods, the before and after the financial crisis of 2007/2009. Generalized autoregressive conditional heteroskedasticity with in-mean conditional variance and generalized error distribution parameterization (GARCH-M-GED) tests are conducted to examine the conditional volatility of total returns index as a function of trading …
The Influence Of Director Stock Ownership And Board Discussion Transparency On Financial Reporting Quality, Jacob M. Rose, Cheri Mazza, Carolyn S. Norman, Anna M. Rose
The Influence Of Director Stock Ownership And Board Discussion Transparency On Financial Reporting Quality, Jacob M. Rose, Cheri Mazza, Carolyn S. Norman, Anna M. Rose
WCBT Faculty Publications
Seventy-two active corporate directors participate in an experiment where management insists on aggressive recognition of revenue, but the chief audit executive proposes a more conservative approach. Results indicate interactive effects of director stock ownership and the transparency of director decisions. Stock-owning directors are more likely to oppose management’s attempts to manage earnings when transparency increases. For non-stock owning directors, however, increasing transparency does not affect the likelihood that directors oppose management’s attempts to manage earnings. The current study challenges suppositions that equate director stock ownership with improved financial reporting and higher corporate governance quality, and it provides evidence that increased …
Monthly Seasonality In Emerging Market: Evidence From Bangladesh, Lutfur Rahman, Abu S. Amin
Monthly Seasonality In Emerging Market: Evidence From Bangladesh, Lutfur Rahman, Abu S. Amin
WCBT Faculty Publications
The presence of the seasonal anomaly in stock returns has been reported extensively in finance literature. This paper examines the presence of monthly anomaly in Dhaka Stock Exchange (DSE), the premier stock exchange of Bangladesh. Data used in the study include daily closing prices of DSE indices such as DSE all share prices index (DSI), DSE general index (DGEN) and DSE 20 index for a period of 01.01.2001-30.06.2010. Several hypotheses have been formulated; those hypotheses have been tested and dummy variable regression was used in the study. The result indicates that May and June returns are positive and statistically significant. …
Should Individual Investors Use Technical Trading Rules To Attempt To Beat The Market?, Thomas S. Coe, Kittipong Laosethakul
Should Individual Investors Use Technical Trading Rules To Attempt To Beat The Market?, Thomas S. Coe, Kittipong Laosethakul
WCBT Faculty Publications
Problem statement: Despite widespread academic acceptance of the Efficient Markets Hypothesis, some stock traders still use technical trading rules in an attempt to beat the market. Approach: This study looked at four trading rules, namely, the arithmetic moving average, the relative strength index, a stochastic oscillator and its moving average. These trading rules compare the relationship of current prices to past price patterns to generate a signal when to buy and sell stocks. The trading rules were tested over the years 2000-2009, a period of time that exhibited bull and bear markets, to determine if traders could actively …
Periodically Collapsing Bubbles In The Asian Emerging Stock Markets, Ako Doffou
Periodically Collapsing Bubbles In The Asian Emerging Stock Markets, Ako Doffou
WCBT Faculty Publications
This paper investigates empirically the existence of periodically collapsing bubbles in the Asian emerging stock markets using the Enders-Siklos (2001) momentum threshold autoregressive model. As explained in Bohl (2003), this non-linear time series technique can be used to analyze bubble driven run-ups in stock prices followed by a crash in a non- cointegration framework with asymmetric adjustment. This technique offers a more potent insight in the stock prices behavior than can possibly be obtained using conventional non-cointegration tests. The empirical findings for ten Asian emerging stock markets from 1993 to 2005 refute the bubble hypothesis.