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Gilbert, Emmeleen Ulita. "Risk-return portfolio modelling." Master's thesis, University of Cape Town, 2007. http://hdl.handle.net/11427/19030.
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Markowitz introduced the concept of modelling the risk associated with a given security as the variance of the expected return and showed how under certain conditions an investors portfolio can be managed by balancing the expected return of the portfolio and its variance. Building on Markowitz original framework, William Sharpe, extended these ideas by connecting a portfolio to a risky asset. This extension became known as the Sharpe Index Model. There are number of assumptions governing the residuals of the Sharpe index model, one being that the error terms of the stocks are uncorrelated. The Troskie-Hossain innovation to the Sharpe Index model relaxes this assumption. We evaluate the Troskie-Hossain model relative to the Sharpe Index Model and Markowitz portfolio, and find that the Troskie-Hossain model approximates the Markowitz efficient frontier and optimal portfolio very closely. Further examining the residuals, we find evidence of autocorrelation and heteroskedasticity. Using ARMA to model the autocorrelation of the residuals has very little impact on the efficient frontier when working with log returns. However when working with simple returns the ARMA shifts the efficient frontier to the left. We find that GARCH(l , 1) models capture most of the autocorrelation in the squared residuals for both simple returns and log returns and shifts the efficient frontier to the left. Modelling a non-constant conditional mean and non-constant conditional variance (ARMA and GARCH) has proven difficult. The more complex a model becomes the more difficult the estimation. We investigate the effects of dividend yields on the efficient frontier, as well as using simple returns vs log returns in portfolio construction. Including dividend yields in our return data shifts the efficient frontier upwards. However only the a's are increased, and the f3's and f3 t-statistics of the shares remain the same. This shift effect of dividends has no impact on the time series or heteroskedastic models. The simple returns efficient frontier lies above that of the log returns efficient frontier. The a 's for simple returns are very different to those of log returns, however the f3's lie in a similar region to those of log returns.
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Chapman, Zaneta Anne. "Risk, Return and Credit." Diss., Temple University Libraries, 2010. http://cdm16002.contentdm.oclc.org/cdm/ref/collection/p245801coll10/id/82992.
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Business AdministrationPh.D.
This dissertation investigates the role of credit in the evaluation of risk and return. The research comprises three essays, which analyze the use of credit from different perspectives. Chapter 1: The first essay proposes a comprehensive theory for the assessment and implementation of "acceptable" underwriting and rating variables. While the use of personal credit was the driving force behind the essay, we extend our theory and models to include all controversial rating classifications. It is shown that a rating classification would be appropriate when the cost to society is relatively small. The use of personal credit in the automobile insurance industry is provided as an application of the proposed models, and other considerations are explored. Chapter 2: For many years, gamblers have developed strategies to reach specific monetary and survival goals. In the second essay, a strategy is introduced in which a speculator engages in bet doubling to increase his chances of walking home a winner. It is shown that with enough credit it is quite possible to become a winner with a high degree of certainty--99.9%, even while facing a losing proposition. However, huge returns require huge risks, and so adopting such a strategy would eventually lead to large losses and negative expected profits. It is also shown that limited liability and a cost of obtaining credit are important factors to consider when analyzing expected gains. Chapter 3: "Hazardously immoral" contracts force external parties to bear significant losses without their consent. Abuses are particularly likely to occur when the threat of system-wide disruption is sufficient to make governments and international agencies bail out the offending organizations in order to limit total damages. The models provided in chapter 2 are presented in the third essay as strategies for externalizing extreme risks, and several results are derived.
Temple University--Theses
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Money, Alex Luxman Narayanan. "Corporate water risk - and return." Thesis, University of Oxford, 2014. http://ora.ox.ac.uk/objects/uuid:ddc0441c-ac54-471a-9741-301cb6b21c4a.
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Corporate water risk is a function of resource dependence, which exposes firms to uncertainty. Firms rationally seek to reduce this risk, and this shapes their disclosure strategies. However, the consequence is that corporate water risk disclosure is becoming increasingly unfit for purpose. As current approaches begin to acquire institutional legitimacy and the path-dependent label of best practice, a status quo is becoming embedded, reinforced through mimetic behaviour. The agency problem that this creates is unchecked; in part because of the legitimacy acquired by the disclosure strategies, but also because of temporal myopia exhibited by investors, which contributes to unpredictable decision-making. The status quo also results in sub-optimal resource allocation, a problem that is compounded by the large and growing global infrastructure deficit for water supply and services. This thesis sets out a framework by which the disclosure of corporate water risk can be meaningfully evaluated by investors and other stakeholders; and proposes how the water infrastructure investment gap could be narrowed by the development and application of the corporate water return concept. The research builds on empirical foundations to offer new approaches that address the problems of the status quo. First, it empirically explores perceptions of best practice in terms of water risk disclosure, from the perspective of both listed firms and leading institutional investors (Chapters 3 and 4). Second, it proposes a methodology through which firms can disclose water risks in a systematic format; and advances corporate water return as a complementary concept to water risk, in order to catalyse corporate investment in water infrastructure (Chapters 5 and 6). Resource dependence theory, institutional theory, and stakeholder theory are combined to create a trio of integrative, explicative conceptual narratives that form the overarching thesis structure. The research also draws on other themes from economic geography, including proximity; strategic cognition; transaction costs; and real options theory.
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Mårtensson, Jonathan. "Portfolio optimisation : improved risk-adjusted return?" Thesis, Uppsala University, Department of Economics, 2006. http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-6397.
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In this thesis, portfolio optimisation is used to evaluate if a specific sample of portfolios have
a higher risk level or lower expected return, compared to what may be obtained through
optimisation. It also compares the return of optimised portfolios with the return of the original
portfolios. The risk analysis software Aegis Portfolio Manager developed by Barra is used for
the optimisations. With the expected return and risk level used in this thesis, all portfolios can
obtain a higher expected return and a lower risk. Over a six-month period, the optimised
portfolios do not consistently outperform the original portfolios and therefore it seems as
though the optimisation do not improve the return of the portfolios. This might be due to the
uncertainty of the expected returns used in this thesis.
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Ghunmi, Diana Nawwash Abed El-Hafeth Abu. "Stock return, risk and asset pricing." Thesis, Durham University, 2008. http://etheses.dur.ac.uk/2908/.
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This thesis attempts to address a number of issues that have been identified in the asset pricing literature as essential for shaping stock returns. These issues include the need to uncover the link between the macroeconomic variables and stock returns. In addition to this, is the need to decide, in light of the findings of the literature, whether to advise investors to include idiosyncratic risk and downside risk as risk factors in their asset pricing models. The results presented here suggest, consistent with other previous studies, that stock returns are a function of a number of previously identified risk factors along with the wider set of macroeconomic variables. These macroeconomic variables could be represented by a number of estimated macro factors. However, only one of these estimated factors emerged as significant in explaining the cross-section of stock returns. Nevertheless, it is important to note that the size (SMB) and value (HML) factors remain important factors in explaining the cross sectional returns on UK stocks, even with the existence of the other risk factors. This finding of inability of the examined macroeconomic variables to capture the pricing power of the SMB and the HML may cast doubt on the possibility of finding more macroeconomic factors that are able to account for these two factors in the cross section of returns in the UK. Interestingly, this conclusion seems to contradict previous authors' findings of potential links in the UK market. The results also support past studies that find that downside risk is an important risk factor and by allowing the downside risk premium to vary with business cycle conditions, downside risk might be a better measure of risk than market risk. Nevertheless, this thesis shows that although this finding is applicable in times of economic expansion, during recession, there is no conclusive relationship between . downside risk and stock returns. Furthermore, this thesis supports the studies which find that idiosyncratic risk is not significant in pricing stocks. However in contrast to other studies, it reveals this by showing that time-varying risk could be the reason behind the potentially illusive findings of idiosyncratic risk effect. This thesis confirms that, for London Stock Exchange investors, macroeconomic variables should never be overlooked when estimating stock returns and downside risk could be an influential risk factor.
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Saldanha, Liesl. "Risk and return in stock markets." Thesis, Glasgow Caledonian University, 1998. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.263381.
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Hossain, Nafees. "Accurate portfolio risk-return structure modelling." Doctoral thesis, University of Cape Town, 2006. http://hdl.handle.net/11427/18423.
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Markowitz's modem portfolio theory has played a vital role in investment portfolio management, which is constantly pushing the development on volatility models. Particularly, the stochastic volatility model which reveals the dynamics of conditional volatility. Financial time series and volatility models has become one of the hot spots in operations research. In this thesis, one of the areas we explore is the theoretical formulation of the optimal portfolio selection problem under Ito calculus framework. Particularly, a stochastic variation calculus problem, i.e., seeking the optimal stochastic volatility diffusion family for facilitating the best portfolio selection identified under the continuous-time stochastic optimal control theoretical settings. One of the properties this study examines is the left-shifting role of the GARCH(1, 1) (General Autoregressive Conditional Heteroskedastic) model's efficient frontier. This study considers many instances where the left shifting superior behaviour of the GARCH(1, 1) is observed. One such instance is when GARCH(1, 1) is compared within the volatility modelling extensions of the GARCH environ in a single index framework. This study will demonstrate the persistence of the superiority of the G ARCH ( 1, 1) frontier within a multiple and single index context of modem portfolio theory. Many portfolio optimization models are investigated, particularly the Markowitz model and the Sharpe Multiple and Single index models. Includes bibliographical references (p. 313-323).
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Lundh, Hampus. "Corporate Spinoffs- A Risk and Return Perspective." Thesis, Jönköping University, JIBS, Economics, 2007. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-811.
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Spinoffs are an increasing phenomenon on the Swedish stock market. In this report one can read about factors that trigger spinoffs as well as about the short and medium term risk and return that spinoffs yield. I have observed 17 pre-spinoff companies that become 34 post-spinoff companies which continued to be traded on the stock market.
For the purpose of the investigation I use time-series regression, and my model is the sin-gle-factor market model. I use this model to estimate the beta and the firm specific factor. Supporting theories are: efficiency, portfolio theory, valuation method and asymmetry all those topics are central parts in a spinoff.
From my research I can not prove that spinoffs increase shareholders wealth. That means that the new units created through a spinoff are not more worth than the old corporation as such the new units do not outperform the old conglomerate structures expected return. However, the new units beta is not equal the old conglomerate structures beta, and this may due to change in capital structure. The weighted beta increase in half of the times, as such, it suggests a higher level of debt financing.
By comparing the spinoff company and the parent company in the post-spinoff scenario it can be concluded that the company who is performing the best is also the riskier alternative and the spinoff performs better than the parent company in eleven out of seventeen times. There is also a correlation between risk and return - when higher return is observed it also brings higher risk, and it holds true in all samples except one.
Further, at group level the spinoff group performs better than the market return and the spinoff group performs on average better than the parent group. Thus, if an outside inves-tor is to invest in either a spinoff company or a parent company one should buy the spinoff company at preferred weight according to the investors risk preferences.
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Mayr, Dominik Stephan. "Return and risk analysis in multinational firms /." [S.l. : s.n.], 2008. http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&doc_number=016429887&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA.
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Feng, Guoliang. "Essays on Local Housing Risk and Return." Thesis, The George Washington University, 2015. http://pqdtopen.proquest.com/#viewpdf?dispub=3716188.
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Local returns to housing investment across the U.S. cities are estimated and applied to explain the stockholding puzzle, i.e. the tendency for US homeowners to hold only housing and risk free assets in their portfolios. Several empirical problems exist in the previous studies: first, rental returns are always ignored or just assumed to be constant across cities; second, the CAP rates at the city level are often based on the problematic BLS Rent Index (the BLS CAP rate) which is questioned by Ambrose et al (2014).
Using micro data from American Housing Survey (AHS), CAP rates for 38 of the largest MSAs in the U.S. (the AHS CAP rate) are estimated. Pooled OLS methods are used to control the heterogeneity in individual housing characteristics and quality differences across tenure types. As expected based on Ambrose et al (2014), AHS CAP rates are much more volatile than BLS CAP rates. Standard deviations of annual AHS CAP rates (national average value is 2.27%) are much larger than those of BLS CAP rates (national average value is 0.57%). Moreover, in inland cities, especially those in Rust Belt, AHS CAP rates reflect more rental risk than BLS CAP rates do. This divergence is smaller in coastal cities where housing price appreciation is more volatile. This implies that past research using the BLS Rent Index to analyze rental risk may be biased.
After formulating CAP rate measures for a panel of cities, this data is used to test the dividend pricing hypothesis (DPH) in housing by studying the trade-off between the capitalization rate and subsequent house price appreciation. In previous tests, even allowing for the fact that actual appreciation does not equal expected appreciation, evidence for the DPH has not been strong. This research has included an implicit assumption that risks associated with housing investment are common across housing markets. In addition, many previous tests have used BLS CAP rates or assumed that the CAP rate was constant across cities and/or over time. In this second essay, statistically constructed estimates of the AHS CAP rate and the variance in total return are used to conduct tests of the DPH. The result is far stronger than those obtained in previous studies of a cross section of U.S. cities. But, when the BLS Rent Index is used to measure CAP rates and risk, the results are not consistent with the DPH.
Finally, these findings about total return to housing investment are used to explain the stockholding paradox. Homeowners tend to hold housing and risk-free assets, but not equities or bonds in their personal portfolios. This has been called the "stockholding paradox" and has been explained by observing that the correlation between the rate of appreciation of national housing prices and returns to the S&P; 500 is relatively high. The common conclusion in the literature has been that homeowners derive only modest diversification benefits from holding stocks and choose instead to amortize their mortgages. In contrast to the empirical literature on the stockholding paradox, Brueckner (1997) has demonstrated the theoretical proposition that consumption constrained households, those whose wealth is a fraction of housing value, will not find holding the market portfolio efficient. This research proceeds from Brueckner's observation. First, total return to homeownership, including both appreciation and AHS CAP rate is measured. Second, properties of optimal portfolios for households under various degrees of consumption constraints are identified. Third, optimal portfolios of individual stocks are determined. The results show that portfolios of individual stocks, which vary by city, are far more attractive than the market portfolio for homeowners. This suggests a resolution to the stockholding puzzle. Homeowners could benefit from holding portfolios designed to offset the unique risk of the cities where they live but they lack information on what these portfolios might be. Given this information gap, holding the market portfolio is not particularly attractive for most homeowners.
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Morelli, David Andrew. "Risk, return and the UK financial markets." Thesis, University of East Anglia, 1999. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.300068.
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Alsunbul, Saad A. "Volatility Interruptions, idiosyncratic risk, and stock return." ScholarWorks@UNO, 2019. https://scholarworks.uno.edu/td/2580.
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The objective of this paper is to examine the impact of implementing the static and dynamic volatility interruption rule on idiosyncratic volatility and stock returns in Nasdaq Stockholm. Using EGARCH and GARCH models to estimate the conditional idiosyncratic volatility, we find that the conditional idiosyncratic volatility and stock returns increase as stock prices hit the upper static or dynamic volatility interruption limits. Conversely, we find that the conditional idiosyncratic volatility and stock returns decrease as stock prices hit the lower static or dynamic volatility interruption limit. We also find that the conditional idiosyncratic volatility is higher when stock prices reach the upper dynamic limit than when they reach the upper static limit. Furthermore, we compare the conditional idiosyncratic volatility and stock returns on the limit hit days to the day before and after the limit hit events and find that the conditional idiosyncratic volatility and stock returns are more volatile on the limits hit days. To test the volatility spill-over hypothesis, we set a range of a two-day window after limit hit events and find no evidence for volatility spill-over one or two days after the limit hit event, indicating that the static and dynamic volatility interruption rule is effective in curbing the volatility. Finally, we sort stocks by their size and find that small market cap stocks gain higher returns than larger market cap stocks upon reaching the upper limits, both static and dynamic.
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Bozhkov, Stanislav. "Idiosyncratic risk and the cross section of stock returns." Thesis, Brunel University, 2017. http://bura.brunel.ac.uk/handle/2438/16792.
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A key prediction of the Capital Asset Pricing Model (CAPM) is that idiosyncratic risk is not priced by investors because in the absence of frictions it can be fully diversified away. In the presence of constraints on diversification, refinements of the CAPM conclude that the part of idiosyncratic risk that is not diversified should be priced. Recent empirical studies yielded mixed evidence with some studies finding positive correlation between idiosyncratic risk and stock returns, while other studies reported none or even negative correlation. In this thesis we revisit the problem whether idiosyncratic risk is priced by the stock market and what the probable causes for the mixed evidence produced by other studies, using monthly data for the US market covering the period from 1980 until 2013. We find that one-period volatility forecasts are not significantly correlated with stock returns. On the other hand, the mean-reverting unconditional volatility is a robust predictor of returns. Consistent with economic theory, the size of the premium depends on the degree of 'knowledge' of the security among market participants. In particular, the premium for Nasdaq-traded stocks is higher than that for NYSE and Amex stocks. We also find stronger correlation between idiosyncratic risk and returns during recessions, which may suggest interaction of risk premium with decreased risk tolerance or other investment considerations like flight to safety or liquidity requirements. The difference between the correlations between the idiosyncratic volatility estimators used by other studies and the true risk metric - the mean-reverting volatility - is the likely cause for the mixed evidence produced by other studies. Our results are robust with respect to liquidity, momentum, return reversals, unadjusted price, liquidity, credit quality, omitted factors, and hold at daily frequency.
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Xu, Zhongxiang. "Cross-sectional return predictability : the predictive power of return asymmetry, skewness and tail risk." Thesis, University of Nottingham, 2017. http://eprints.nottingham.ac.uk/41310/.
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This thesis attempts to investigate the cross-sectional predictive power of return asymmetry, skewness and tail risk. It mainly consists of three empirical chapters on the relation between predictive patterns of the return distribution and expected stock returns. In the first empirical chapter, I adopt a measure of asymmetry, originally proposed by Patil et al. (2012), which can be employed to characterise the shape of the entire distribution of asset returns instead of skewness. Empirical evidence on the relation between asset returns and the skewness of the return distribution is mixed. As skewness is primarily influenced by the tail behaviour of the return distribution, it is possible for two distributions with identical skewness to have quite different asymmetry. I will examine the relationship between this new measure and stock returns. My empirical analysis indicates that stocks with high return asymmetry exhibit low expected returns. The negative relation between return asymmetry and expected returns persists after I control for size, book-to-market, momentum, short-term return reversals, liquidity, idiosyncratic volatility and various skewness factors. My results are consistent with the findings from theoretical models such as those of Brunnermeier et al. (2007) and Barberis and Huang (2008). In the second empirical chapter, I examine the default risk and financial crisis explanations for the market skewness risk effect and find that the effect is stronger among stocks with large size, high growth, and low default risk. This suggests that the positive skewness preference theory only holds for safe stocks. Moreover, the effect of market skewness risk on stock returns interacts with default risk significantly. Market skewness risk has explanatory power for stock returns only during the periods of good economic conditions. Additionally, the market skewness risk effect is not persistent. After the financial crisis of 2007-2008, the strong effect disappears. In the last empirical chapter, I know that investors sometimes underweight the tail event. I then try to figure out this situation by examining the default risk and financial crisis explanations for the tail risk effect. I find that market size, book-to-market ratio, and default risk have large impact on the tail risk effect. Moreover, tail risk only has explanatory power for stock returns during the periods of good economic conditions. The results suggest that when investors hold stocks with small size, low growth, and high default risk, the tail risk tends to be ignored. The tail risk effect is not persistent. The significant tail risk effect also disappear after the financial crisis of 2007-2008.
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Solcà, Tatiana. "Expected risk-adjusted return for insurance based models." Zürich : Swiss Federal Institute of Technology Zurich, Department of Mathematics, 2000. http://e-collection.ethbib.ethz.ch/show?type=dipl&nr=21.
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Motson, Nick. "Essays on hedge fund risk, return and incentives." Thesis, City University London, 2009. http://openaccess.city.ac.uk/12086/.
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There is no legal or regulatory of what constitutes a hedge fund, though the generally accepted definition is that they are unregulated pools that invest in any asset class as well as derivative securities and use long and short positions, as well as leverage where the manager is compensated with a proportion of the returns. Hedge funds are not new, Alfred Winslow Jones in generally credited with the formation of the first hedge fund in 1949, however the industry remained small and relatively unnoticed for many years. In 1990, there were just 610 hedge funds managing approximately $39bn of capital, however by the end of 2007 the industry had grown to over 10,000 funds managing almost $2trn of capital. The credit crisis of 2008 which has caused hedge funds to suffer both investment losses and investor redemption means that as of the end of 2008 the industry has contracted with over 1,000 funds closing and the capital being reduced to $1.5btrn.
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Koutmos, Dimitrios. "Asset pricing and the intertemporal risk-return tradeoff." Thesis, Durham University, 2012. http://etheses.dur.ac.uk/3529/.
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The intertemporal risk-return tradeoff is the cornerstone of modern empirical finance and has been the focus of much debate over the years. The reason for this is because extant literature cannot agree as to the very nature of this important relation. This is troublesome in terms of academic theory given that it challenges the notion that investors are risk-averse agents and is furthermore troublesome in practice given that market participants expect to be rewarded with higher expected returns in order to take on higher risks. The motivation for this thesis stems from the conflicting and inconclusive empirical evidence regarding the risk-return tradeoff. Through each of the chapters, it sheds new light on possible reasons as to why extant studies offer conflicting evidence and, given the enhancements and innovative approaches proposed here, it provides empirical evidence in support of a positive intertemporal risk-return tradeoff when examining several international stock markets. The research questions this thesis addresses are as follow. Firstly, is it possible that extant conflicting evidence is manifested in the use of historical realized returns to proxy for investors’ forward-looking expected returns? Secondly, can accounting for shifts in investment opportunities (i.e. intertemporal risk) better explain investors’ risk aversion and changes in the dynamic risk premium? Thirdly, is it possible that conflicting findings are the result of neglecting to account for the possibility that there exist heterogeneous investors in the stock market with divergent expectations? The empirical findings can be summarized as follows; firstly, there is a strong possibility that many existing studies cannot find a positive risk-return relation because they are relying on ex post historical realized returns as a proxy for investors’ forward-looking expected returns. Secondly, there is evidence in favor of the Merton (1973) notion that there exists intertemporal risk which impacts investors and that this type of risk should be considered. This has been also another reason why extant literature cannot agree on the nature of the intertemporal risk-return tradeoff. Finally, even after accounting for investor heterogeneity, the findings provide support for the Merton (1973) theoretical Intertemporal Capital Asset Pricing Model. Namely, in contrast to existing studies on the matter, there is evidence of fundamental traders over longer horizons and no evidence of feedback traders at such horizons. Although this sheds new light on some of the driving forces behind stock prices, the nature of investors’ degree of risk aversion seems to be best supported by the Merton (1973) theoretical Intertemporal Capital Asset Pricing Model.
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Munira, Sirajum. "Momentum return : is it a compensation for risk?" Thesis, City, University of London, 2009. http://openaccess.city.ac.uk/19589/.
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This thesis examines if momentum returns are compensation for risk. Using a sample period from 1926 through 2006 for all stocks listed in the NYSE, AMEX and NASDAQ we provide a comprehensive analysis of momentum returns both at the portfolio and at the individual stock level, by using firm level and macro level risk factors and by employing contemporaneous and lagged values of risk factors. The study employs an alternative momentum strategy, measures the relative contribution of risks factor that generates momentum returns and establishes a link between momentum returns, uncertainty and credit ratings. We report raw momentum returns of 0.8 percent per month (9.6 percent per annum) when returns are measured using the conventional methodology at the portfolio level. Momentum returns are predominantly high and earn more than 1 percent per month during the post-1950s compared to its counterpart in the pre-1950s. The study reports that when measured at the portfolio level momentum returns cannot be explained by risk factors. We document momentum returns of up to 0.01 percent per month (0.12 percent per annum) after Fama-French three factors, Carhart four factors and macroeconomic risk factors are priced for. The results are robust when the lagged values of these risk factors are employed. We further document momentum returns of 0.16 percent per month (1.92 percent per annum) when transaction cost is taken into account. When measured at the individual stock level momentum returns cannot be explained by Fama-French three factors and contemporaneous values of macroeconomic risk factors. Unexplained returns are observed up to 0.45 percent per month (5.4 percent per annum) when Fama-French three factors are used. Unexplained returns up to 0.15 percent per month (1.8 percent per annum) are observed when contemporaneous values of macroeconomic risk factors are used. However, when the lagged values of macroeconomic risk factors are used, momentum returns disappear. We decompose momentum returns to measure the relative contribution of the risk factors and the unexplained portion of momentum returns. At the portfolio level, decomposition shows that less than 10 percent of the contribution is from Fama-French three factors and less than 20 percent of the contribution is from macroeconomic risk factors. Unexplained portion contributes the remaining 90 percent and 80 percent, respectively. At the individual stock level, decomposition shows that contribution of both Fama-French three factors and macroeconomic risk factors increases up to 47 percent and 59 percent, respectively; unexplained portion contributes the remaining 63 percent and 41 percent, respectively. When lagged values are used the contribution of risk factors increases up to 68 percent. Finally, we consider uncertainty at the firm level and the macro-economic risk level by measuring momentum returns of credit rated stocks. We observe momentum returns of 1.22 percent per month (14.64 percent per annum) in credit rated stocks. Among the credit rated stocks momentum returns are mainly earned by speculative grade stocks and during contractions. Momentum returns of about 2 percent per month (23 percent per annum) are observed in speculative grade stock and they are more pronounced of up to 4.99 percent per month (59.88 percent per annum) during contractions. However, momentum returns of speculative grade stocks disappear when controlled for macroeconomic risk factors. We show that momentum is quite persistent when measured at the portfolio level by using the conventional approach and at the individual stock level when using an alternative approach. Momentum returns cannot be explained by Fama-French three factors and contemporaneous values of macroeconomic risk factors. However, only at the individual stock level, lagged values of macroeconomic risk can explain momentum returns. When we decompose momentum returns into explained and unexplained components, we provide support to the above findings that the contribution of macroeconomic risk factors is the highest when measured at the individual stock level. Momentum are reactions of the investors’ to high uncertainty, when uncertainty is measured at the firm level or at the macro level by measuring returns of credit rated stocks. Momentum returns are investors’ reaction due to increased business risk of stocks or due to increased macroeconomic risk during downturns. It can be concluded that at the portfolio level momentum returns remain when risk factors are price for and at the individual stock level momentum returns diminishes though they do not disappear entirely when risk factors are controlled for. When momentum returns are decomposed at the portfolio level unexplained risk factors contributes the most and at the individual stock level contribution of risk factors increases among which the contribution of macroeconomic risk factors increases the most. Momentum returns could be a compensation for uncertainty at the firm level as it concentrates mostly on Speculative Grade rated stocks with more pronounced effect during contraction. Momentum returns disappear when macroeconomic risk factors are priced.
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Manandhar, Rejina. "Return-Entry Risk Communication Following 2012 Hurricane Sandy." Thesis, University of North Texas, 2015. https://digital.library.unt.edu/ark:/67531/metadc848209/.
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Within risk communication, much is understood about pre-event warning related to evacuation and sheltering; however risk communication during the return-entry phase when ending evacuations has been largely under-studied in the disaster literature. Understanding of the return-entry risk communication process is important because returning early or prior to issuance of the all-clear message can make returnees susceptible to post-disaster risks, and also hamper post-disaster activities such as debris removal, traffic management, utility restoration and damage assessments. Guided by the Warning Components Framework and the Theory of Motivated Information Management, this dissertation focuses on risk communication as it pertains to organizational behavior during the return-entry process by examining how local emergency management organizations develop, disseminate and monitor return-entry messages. The data is collected through semi-structured telephone interviews with local emergency management organizations that managed return-entry following Hurricane Sandy. The findings of the study indicate that local emergency management organizations required information on post-disaster threats, damages, and utility and infrastructure condition in order to develop return-entry strategy for their community. Organizations improvised to their existing risk communication measures by adopting creative ways for information dissemination to the evacuees. They also utilized active and passive approach to monitor public response to the return-entry messages.
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Tian, Lijun. "Modeling risk and return in China's stock market." Diss., Restricted to subscribing institutions, 2007. http://proquest.umi.com/pqdweb?did=1417810931&sid=1&Fmt=2&clientId=1564&RQT=309&VName=PQD.
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Gómez, Portilla Karoll. "Essays on Bond Return Predictability and Liquidity Risk." Thesis, Toulouse 1, 2015. http://www.theses.fr/2015TOU10001/document.
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S’il existe de l’information intéressante pour prévoir les prix des titres du Trésor au fil du temps, comment peut-on utiliser cette information pour améliorer le rapport risque/rendement de l’investisseur et la modélisation de la structure par terme ? Cette thèse a pour objectif de répondre à cette question. Le premier chapitre analyse le rôle prédictif des mesures alternatives de la prime de liquidité des TIPS (Treasury Inflation-Protected Securities) par rapport aux titres du Trésor pour des rendements en excès des obligations gouvernementales. Les résultats montrent que la prime de liquidité prévoit des rendements en excès positifs (négatifs) pour les TIPS (Treasury nominales). Je trouve, également, que le pouvoir de prévision hors échantillon de la liquidité des rendements en excès des Treasury nominales paraît avoir été guidé par les évènements de la crise financière récente. Par contre, je trouve empiriquement qu’il y a également une capacité de prévision des rendements en excès des TIPS hors échantillon pendant les périodes normales aussi bien que pour les mauvaises périodes.Dans le deuxième chapitre, j’examine si la prime de liquidité des TIPS peut être considérée comme un facteur dit unspanned (c’est-à-dire dont la valeur n’est pas une combinaison linéaire de la courbe des rendements) pour prévoir les rendements des obligations, mais qu’elle n’est pas nécessairement spanned par la courbe des taux des États Unis. Je considère un modèle affine et gaussien de la structure par terme d'obligations à coupon zéro du Trésor américain pour l’ensemble des Treasuries and TIPS, avec un facteur unspanned : le risque de liquidité. Dans ce modèle, le facteur de liquidité est contraint d’affecter seulement les rendements de coupe transversale, mais il permet de déterminer les primes de risque des obligations. L’évidence empirique suggère que le facteur de liquidité n’affecte pas la dynamique des obligations en vertu de la probabilité risque-neutre, mais qu’il affecte cette dynamique sous la mesure historique. Par conséquent, l'information contenue dans la courbe de rendement s’avère insuffisante pour caractériser complètement la variation du prix du risque de courbure. Dans le troisième chapitre, j’estime, par des méthodes non paramétriques, le choix de portefeuille optimal d’obligations pour un agent représentatif qui agit d’une façon optimale par rapport à son utilité espérée sur la période suivante, à partir du signal de liquidité observé ex ante. Considérant les différentes mesures de liquidité, je trouve que le différentiel de liquidité entre les obligations nominales et les TIPS paraît être un facteur significatif de choix du portefeuille en obligations du gouvernement des États Unis. En effet, l’allocation conditionnelle en actifs risqués décroit avec la détérioration des conditions de liquidité du marché, et l’effet de liquidité du marché diminue avec l’horizon d’investissement. Je trouve également que la prévisibilité de rendement des obligations se traduit par une meilleure allocation et performance aussi bien intra que hors échantillonIf there is valuable information for predicting bond prices over time, how can we use this information to improve investor’s risk-return trade-off and term structure modelling? This thesis aims at answering this question. The first chapter discusses the predictive role of alternative measures of the liquidity premium of TIPS relative to Treasury bonds for government excess bond returns. Results show that the liquidity premium predicts positive (negative) TIPS (nominal Treasury) excess returns. I also find that the out-of sample forecasting power of liquidity for nominal Treasury excess returns appears to have been addressed by the events during the recent financial crisis. By contrast, I have evidence of out-of- sample forecasting ability during both normal and bad times for TIPS’ excess returns. In the second chapter, I explore whether or not the TIPS liquidity premium can be considered as an unspanned factor that forecast bond returns, but that is not necessarily spanned by the U.S. yield curve. I consider a joint Gaussian affine term structure model for zero-coupon U.S. Treasury and TIPS bonds, with an unspanned factor: liquidity risk. In the model, the liquidity factor is restricted to affect only the cross-section of yields but it is allowed to determine the bond risk premia. I present empirical evidence suggesting that the liquidity factor does not affect the dynamic of bonds under the pricing measure, but does affect them under the historical measure. Consequently, the information contained in the yield curve appears to be insufficient to completely characterize the variation in the price of curvature risk. In the third chapter, I estimate the non-parametric optimal bond portfolio choice of a representative agent that acts optimally with respect to his/her expected utility one period forward, provided that he/she observes the ex-ante liquidity signal. Considering alternative measures of liquidity, I find that the liquidity differential between nominal and TIPS bonds appears to be a significant determinant of the portfolio allocation to U.S. government bonds. In fact, conditional allocations in risky assets decrease as market liquidity conditions worsen, and the effect of market liquidity decreases with the investment horizon. I also find that the bond return predictability translates into improved in-sample and out-of-sample asset allocation and performance
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Arnold, Bruce Robert Banking & Finance Australian School of Business UNSW. "Ratings transitions and total return." Publisher:University of New South Wales. Banking & Finance, 2009. http://handle.unsw.edu.au/1959.4/43791.
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The expected yield to maturity on a defaultable obligation equals the nominal yield less expected default losses. However, in a mark-to-market world, one doesn't have the luxury of reporting one's performance on the basis of yield to maturity. Total return is calculated for an arbitrary holding period, and must reflect any mark-to-market gains or losses as at the close of the period-gains or losses that can be triggered by the bond's upgrade or downgrade. Thus to estimate expected total return, one must estimate not only expected default losses, but also the impact on capital price of expected ratings transitions. This paper begins with the observation that a bond which is blessed by more favourable transition characteristics is likely to produce a higher total return, and poses the question of how that benefit can be quantified. How much is it worth? To answer the question, I start by specifying a formal bond-pricing model reflective of ratings transitions. I survey various statistical methods and past research efforts to identify the ratings-transition matrix which best parametrises the model, and propose a novel test for selecting between competing matrices. Using this approach, I replicate several important studies of ratings transitions. I also use it to examine new published and unpublished data, testing for (and finding) ratings path-dependency, and otherwise exploring the effect of ratings changes on different bond sectors. I then turn to the question of whether it is possible to estimate bond-specific transition probabilities, and propose a way to do so. I combine these efforts into the specifications for a pricing model capable of answering the question: How much is it worth?
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Elgammal, Mohammed. "An empirical analysis of the relationship between the value premium and financial distress within a GARCH framework." Thesis, University of Aberdeen, 2010. http://digitool.abdn.ac.uk:80/webclient/DeliveryManager?pid=137007.
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This thesis provides an empirical analysis of the relationship between the value premium and financial distress. Measures of leverage and default are used as proxies for financial distress. Using both an international data set, 1991 to 2006 and a long time series data set for the United States, 1927 – 2007, the thesis adds knowledge about the role of the value premium in asset pricing theory. Generalised autoregressive conditional heteroscedastic modelling (GARCH) is used and information gathered on the volatility of the value premium. A vector autoregressive (VAR) framework and Granger Causality tests are utilised in order to offer a deeper examination of the relationship between risk premium and economic activity. The results add further evidence to support the view that the value premium appears to be linked to variables associated with financial distress, although it is noted that this does not necessarily mean that participants in financial markets behave rationally.
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COSTA, PAULO HENRIQUE SOTO. "BRAZILIAN STOCK RETURN SERIES: VOLATILITY AND VALUE AT RISK." PONTIFÍCIA UNIVERSIDADE CATÓLICA DO RIO DE JANEIRO, 2001. http://www.maxwell.vrac.puc-rio.br/Busca_etds.php?strSecao=resultado&nrSeq=1743@1.
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COORDENAÇÃO DE APERFEIÇOAMENTO DO PESSOAL DE ENSINO SUPERIORO objetivo principal do trabalho é o estudo dos resultados obtidos com a aplicação de diferentes modelos para estimar a volatilidade das ações brasileiras. Foram analisadas as séries de retornos diários de seis ações, num período de 1200 dias de pregão. Inicialmente, as séries foram estudadas quanto a suas propriedades estatísticas: estacionariedade, distribuição incondicional e independência. Concluiu-se que as séries são estacionárias na média, mas não houve conclusão quanto à variância, nesta análise inicial. A distribuição dos retornos não é normal, por apresentar leptocurtose. Os retornos mostraram dependência no tempo, linear e, principalmente, não linear. Modelada a dependência linear, foram aplicados dez modelos diferentes para tentar capturar a dependência não linear através da modelagem da volatilidade: os modelos foram avaliados, dentro e fora da amostra, pelos seus resíduos e pelos erros de previsão. Os resultados indicaram que os modelos menos elaborados tendem a representar pior o processo gerador dos dados, mas que os modelos pouco parcimoniosos são de difícil estimação e seus resultados não correspondem ao que seria esperado em função de sua sofisticação. As volatilidades estimadas pelos dez modelos foram utilizadas para prever valor em risco (VaR), usando- se dois processos para determinar os quantis das distribuições dos resíduos: distribuição empírica e teoria de valores extremos. Os resultados indicaram que os modelos menos elaborados prevêem melhor o VaR. Isto se deve à não estacionariedade das séries na variância, que fica evidente ao longo do trabalho.
This thesis aims to study the results of applying different models to estimate Brazilian stock volatilities. The models are applied to six series of daily returns, and each series has 1200 days. We studied first the series` main statistical features: Stationarity, unconditional distribution and independence. We concluded that the series are mean stationary, but there was no conclusion on variance stationarity, in this first analysis. Return distribution is not normal, because of the high kurtosis. Returns showed time dependence, linear and, mainly, not linear. We modeled the linear dependence, and then applied ten different volatility models, in order to try to capture the non linear dependence. We evaluated the different models, in sample and out of sample, by analyzing their residuals and their forecast errors. The results showed that the less sophisticated models tend to give a worst representation of the data generating process; they also showed that the less parsimonious models are difficult to estimate, and their results are not as good as we could expect from their sophistication. We used the ten models` volatility forecasts to estimate value-at-risk (VaR) and two methods to estimate the residual distribution quantiles: empirical distribution and extreme value theory. The results showed that the less sophisticated models give better VaR estimates. This is a consequence of the variance non stationarity, that became apparent along the thesis.
EL objetivo principal del trabajo es el estudio de los resultados obtenidos con la aplicación dediferentes modelos para estimar la volatilidad de las acciones brasileras. Fueron analizadas series de retornos diários de seis acciones, en un período de 1200 días de pregón. Inicialmente, las series fueron estudiadas con respecto a sus propriedades estadísticas: estacionalidad, distribucción incondicional e independencia. Se concluye que las series son estacionarias en la media, pero no se llega a ninguna conclusión respecto a la varianza, en este análisis inicial. La distribucción de los retornos no es normal, ya que presenta leptocurtosis. Los retornos muestran dependencia en el tempo, lineal y, principalmente, no lineal. Después de modelar la dependencia lineal, se aplicaron diez modelos diferentes para intentar capturar la dependencia no lineal modelando la volatilidad: los modelos fueron evaluados, dentro y fuera de la amostra, por sus residuos y por los errores de previsión. Los resultados indicaran que los modelos menos elaborados tienden a representar peor el proceso generador de los datos, mientras que los modelos poco parcimoniosos son de difícil estimación y sus resultados no corresponden al que sería esperado en función de su sofisticación. Las volatilidades estimadas por los diez modelos se utilizaron para prever valor en riesgo (VaR), usando dos procesos para determinar los quantis de las distribuciones de los residuos: distribucción empírica y teoría de valores extremos. Los resultados indicaran que los modelos menos elaborados preveen mejor el VaR. Esto se debe a la no estacionalidad de las series en la varianza, que resulta evidente a lo largo del trabajo.
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Patitsas, Leon S. "Shipping : is it a high risk low return business?" Thesis, Massachusetts Institute of Technology, 2004. http://hdl.handle.net/1721.1/33571.
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Thesis (S.M.)--Massachusetts Institute of Technology, Dept. of Ocean Engineering, 2004.Includes bibliographical references (p. 78-79).
The purpose of this thesis is to investigate the risk and return characteristics of the shipping business. Shipping profitability and returns are evaluated and an analysis is performed to examine whether the returns are adequate to compensate the amount of risk the investor is bearing. Statistical tools are used to quantify risk and the average returns of the shipping industry are measured and compared with other asset classes. Diversification among different types of ships, and different asset classes is used to maximize the return and minimize the risk of an "efficient fleet". The Capital Asset Pricing Model and the efficient frontier are used to identify the optimal asset allocation. Valuation methods and investment timing techniques are used in order to increase the probability of success and improve the decision making. Finally a real project is evaluated using financial tools.
by Leon S. Patitsas.
S.M.
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Ledoit, Olivier Richard Henri. "Essays on risk and return in the stock market." Thesis, Massachusetts Institute of Technology, 1995. http://hdl.handle.net/1721.1/11875.
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Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 1995.Vita.
Includes bibliographical references (leaves 131-134).
by Olivier Richard Henri Ledoit.
Ph.D.
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Oliveira, Carolina Downey de. "Risk and return: the international expansion of EDP Renováveis." Master's thesis, NSBE - UNL, 2013. http://hdl.handle.net/10362/9847.
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Dieye, Abdoulaye Ndiaye. "Asset Return Determinants : risk Factors, Asymmetry and Horizon consideration." Thesis, Lyon, 2019. http://www.theses.fr/2019LYSE2070.
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Les déterminants du rendement des actifs demeurent un sujet de recherche actif dans la littérature financière. Cette thèse s’intéresse au rôle de certains facteurs de risque, de l’asymétrie de la distribution des rendements et de l’horizon d’investissement comme déterminants des rendements d’actifs. Nous démontrons d’abord que l’effet de taille peut être considéré comme étant partiellement le fait de certains secteurs industriels jugés statistiquement pertinents pour expliquer spécifiquement la performance des portefeuilles constitués d’entreprises de petites (grandes) tailles puis nous en étudions les implications empiriques sur les modèles d’évaluation des actifs. Nous considérons, dans un deuxième temps, la relation entre le marché et les principaux facteurs de risque proposés dans la littérature – dont le facteur SMB qui prend explicitement en compte l’effet de taille – et soulignons que les facteurs considérés peuvent être partiellement expliqués par le facteur de marché de manière non-linéaire. En outre, nous montrons que l’exploitation de la relation non-linéaire entre le marché et ces facteurs de risque peut être profitable en termes de stratégies d’investissement. La dernière partie de cette thèse s’intéresse à la question de la diversification temporelle et analyse l’impact de l’horizon sur lespropriétés de la distribution des rendements composés pour montrer que l’effet de composition est la raison principale de la forme des distributions de rendement à long terme. Nous apportons alors un nouvel éclairage permettant d’expliquer les divergences d’opinions exprimées dans la littérature quant aux stratégies de placement à suivre sur le long termeThe determinants of asset returns remain an active research topic in the financial literature. This thesis focuses on the role of certain risk factors, of the asymmetry of the distribution of returns and of the investment horizon as determinants of asset returns. We first demonstrate that the size effect can be considered partially due to specific industries that are considered statistically relevant to explain the performance of the portfolios of small (big) firms and we study the empirical implications of this finding in terms of asset pricing. We then consider the relationship between the market and the main risk factors proposed in the literature – including the factor SMB that explicitly accounts for the size effect – and point out that the considered factors can be partially explained by a non-linear relation with the market factor. In addition, we show that exploiting the non-linear relationship between the market and these risk factors can be profitable in terms of investmentstrategies. The last part of this thesis focuses on the issue of time diversification and analyses the impact of the horizon on the properties of the compounded return distributions to show that the compounding effect is the main reason for the shapeof the long-term return distributions. We then shed new light on the divergences of opinion expressed in the literature regarding long-term investment strategies
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Bieri, Annett. "Replication of Hedge Fund Investment Returns Risk and return comparison of recent Hedge Fund replication products /." St. Gallen, 2008. http://www.biblio.unisg.ch/org/biblio/edoc.nsf/wwwDisplayIdentifier/02601805002/$FILE/02601805002.pdf.
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Frade, Carlos Augusto Zerpa. "Performance of return models : a portfolio theoretical approach." Master's thesis, Instituto Superior de Economia e Gestão, 2017. http://hdl.handle.net/10400.5/14699.
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Mestrado em FinançasO objetivo desta investigação é avaliar o impacto das assunções dos modelos geradores de retornos nas fronteira eficiente e seus portafolios. Isto foi conseguido mediante o trabalho in-sample (assim eliminando o risco de estimação, focando a investigação no risco de modelo) em ambos mercados de ativos financeiros, o Europeo e Americano, nos 7 anos anteriores, considerando ambos, o caso em que shortselling esta permitido como também o caso em que esta proibido. O processo inclui o calculo da fronteira eficiente seguindo as assunções dos modelos geradores de retornos. Em particular o Constant Correlation Model (CCM), o Single-Index Model (SIM) e o modelo de tres factores de Fama e French (1993) Multi-Factor Model (MFM). Para os dois mercados de investimentos, comparamos a fronteira eficiente gerada aplicando MVT nos dados in-sample com a fronteira eficiente dos modelos de retorno seleccionados. Mostramos que o risco do model è importante na aplicação do MVT. Sendo os erros encontrados em todos os modelos consideravel. Também, considerando o risco de modelo para o caso de shortselling proibido, o CCM mostra melhor desempenho que os modelos mais sofisticados. Por outra parte, em condiçoes de shortselling permitido, o SIM mostra melhor desempenho.
The objective of this research is evaluating the impact of the return generating models assumptions in the efficient frontier and its portfolios. This is accomplished by working with in-sample data (eliminating the estimation risk and focus on the model risk) looking at both the European and American stock markets for the past 7 years, and considering both, the case when shortselling is allowed and the case when it is forbidden. The process includes the calculation of efficient frontier under the assumptions of return generating models. In particular, we look at the Constant Correlation Model (CCM), the Single-Index Model (SIM) and the three factors Fama and French (1993) Multi-Factor Model (MFM). For both markets we compared the true efficient frontier generated from the in-sample MVT with the corresponding efficient frontiers from the return generating models. We show model risk is an important issue when applying MVT. The errors in all model are considerable. In addition, considering model risk for cases when the short-sell is not allowed, the CCM is more accurate than more sophisticated models. On the other hand, under conditions of short-sell allowed, the SIM seams to be more accurate.
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Shang, Danjue. "Option Markets and Stock Return Predictability." Diss., The University of Arizona, 2016. http://hdl.handle.net/10150/613277.
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I investigate the information content in the implied volatility spread, which is the spread in implied volatilities between a pair of call and put options with the same strike price and time-to-maturity. By constructing the implied volatility time series for each stock, I show that stocks with larger implied volatility spreads tend to have higher future returns during 2003-2013. I also find that even volatilities implied from untraded options contain such information about future stock performance. The trading strategy based on the information contained in the actively traded options does not necessarily outperform its counterpart derived from the untraded options. This is inconsistent with the previous research suggesting that the information contained in the implied volatility spread largely results from the price pressure induced by informed trading in option markets. Further analysis suggests that option illiquidity is associated with the implied volatility spread, and the magnitude of this spread contains information about the risk-neutral distribution of the underlying stock return. A larger spread is associated with smaller risk-neutral variance, more negative risk-neutral skewness, and seemingly larger risk-neutral kurtosis, and this association is primarily driven by the systematic components in risk-neutral higher moments. I design a calibration study which reveals that the non-normality of the underlying risk-neutral return distribution relative to the Brownian motion can give rise to the implied volatility spread through the channel of early exercise premium.
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Krohmer, Philipp. "Essays in financial economies : risk and return of private equity /." Frankfurt a.M, 2008. http://opac.nebis.ch/cgi-bin/showAbstract.pl?sys=000259486.
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Maitland-Smith, James K. "Risk and return in commercial real estate : exploring the relationship." Thesis, University of Reading, 1997. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.339493.
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Lu, Qinye. "Empirical studies on stock return predictability and international risk exposure." Thesis, University of Manchester, 2016. https://www.research.manchester.ac.uk/portal/en/theses/empirical-studies-on-stock-return-predictability-and-international-risk-exposure(e0507a38-94d6-4252-adef-b8ff824f207b).html.
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This thesis consists of one stock return predictability study and two international risk exposure studies. The first study shows that the statistical significance of out-of-sample predictability of market returns given by Kelly and Pruitt (2013), using a partial least squares methodology, constructed from the valuation ratios of portfolios, is overstated for two reasons. Firstly, the analysis is conducted on gross returns rather than excess returns, and this raises the apparent predictability of the equity premium due to the inclusion of predictable movements of interest rates. Secondly, the bootstrap statistics used to assess out-of-sample significance do not account for small-sample bias in the estimated coefficients. This bias is well known to affect in-sample tests of significance and I show that it is also important for out-of-sample tests of significance. Accounting for both these effects can radically change the conclusions; for example, the recursive out-of-sample R2 values for the sample period 1965-2010 are insignificant for the prediction of one-year excess returns, and one-month returns, except in the case of the book-to-market ratios of six size- and value-sorted portfolios which are significant at the 10% level. The second study examines whether U.S. common stocks are exposed to international risks, which I define as shocks to foreign markets that are orthogonal to U.S. market returns. By sorting stocks on past exposure to this risk factor I show that it is possible to create portfolios with an ex-post spread in exposure to international risk. I examine whether the international risk is priced in the cross-section of U.S. stocks, and find that for small stocks an increase in exposure to international risk results in lower returns relative to the Fama-French three-factor model. I conduct similar analysis on a measure of the international value premium and find little evidence of this risk being priced in U.S. stocks. The third study examines whether a portfolios of U.S. stocks can mimic foreign index returns, thereby providing investors with the benefits of international diversification without the need to invest directly in assets that trade abroad. I test this proposition using index data from seven developed markets and eight emerging markets over the period 1975-2013. Portfolios of U.S. stocks are constructed out-of-sample to mimic these international indices using a step-wise procedure that selects from a variety of industry portfolios, stocks of multinational corporations, country funds and American depositary receipts. I also use a partial least squares approach to form mimicking portfolios. I show that investors are able to gain considerable exposure to emerging market indices using domestically traded stocks. However, for developed market indices it is difficult to obtain home-made exposure beyond the simple exposure of foreign indices to the U.S. market factor. Using mean-variance spanning tests I find that, with few exceptions, international indices do not improve over the investment frontier provided by the domestically constructed alternative of investing in the U.S. market index and portfolios of industries and multinational corporations.
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Sivarajan, Swaminathan. "Risk tolerance, return expectations and other factors impacting investment decisions." Thesis, University of Manchester, 2019. https://www.research.manchester.ac.uk/portal/en/theses/risk-tolerance-return-expectations-and-other-factors-impacting-investment-decisions(90fd4076-2d8f-4dc6-8ff3-a1ecd8c0d188).html.
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Do investment portfolios meet the needs and preferences of investors? Can the portfolio selection process be improved? Traditionally, investor preferences have been identified using risk tolerance questionnaires. These questionnaires have recently attracted a fair deal of criticism. However, there has been little focus as to whether the questionnaires are useful in predicting investors' risk-taking behaviour. In this thesis, an explanatory sequential mixed methods approach was employed to find answers to the primary research question: what factors determine risk-taking behaviour in investment decisions? This thesis looked at the risk-taking behaviour of investors in Canada (N=192) and the risk-taking advice provided by financial advisers in Canada (N=155), collectively risk-taking decisions. The results suggested that return expectations and demographic variables were important predictors of risk-taking decisions, whereas risk tolerance questionnaires were not. Further investigation suggested that investment literacy impacted risk-taking decisions while investment experience impacted both return expectations and risk-taking decisions. In a novel contribution by this thesis, additional perspective was provided by qualitative analysis using semi-structured interviews with investors and advisers. From the results of the qualitative analysis, the author suggests that discovery and self-discovery, a consistent approach and a focus on process versus outcome are key attributes valued by both investors and advisers. The thesis concluded with implications and recommendations for stakeholders, including a greater focus on return expectations, more training in discovery for advisers, simulating investment experience for prospective investors and including investment literacy in school curricula.
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Han, Jun 1959. "The risk and return characteristics of real estate investment trusts." Thesis, Massachusetts Institute of Technology, 1991. http://hdl.handle.net/1721.1/13157.
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Macastropa, Fabrício Caprio. "A aplicabilidade da moderna teoria de portfólios em títulos de renda fixa internacionais." Universidade de São Paulo, 2006. http://www.teses.usp.br/teses/disponiveis/12/12139/tde-14122006-165947/.
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Segundo o artigo ?Effects of Financial Globalization on Developing Countries: Some Empirical Evidence?, publicado pelo Fundo Monetário Internacional em 17 de março de 2003, a globalização financeira, definida como o aumento dos fluxos de capitais e investimentos entre países, contribuiu para o desenvolvimento do mercado de títulos de renda fixa internacional. A grande necessidade de recursos financeiros para o pagamento de dívidas e investimentos em diversos setores produtivos faz com que os governos utilizem-se de captações externas. Neste contexto, investidores interessados na obtenção de retornos superiores, compram esses títulos, diversificam suas carteiras de investimento e usufruem dos rendimentos que estes possibilitam, sejam sob a forma de cupom e/ou ganhos de capital.O trabalho de Harry Markowitz (1952), ?Portfolio Selection?, cuja principal contribuição é a distinção entre a variabilidade do retorno de um ativo financeiro e seu impacto no risco de uma carteira de investimento, possibilita que, desde que se disponha de um conjunto de dados, constitua-se carteiras que forneçam o menor nível de risco para um determinado nível de retorno de investimento. Este estudo propõe investigar se o trabalho desenvolvido por Harry Markowitz em 1952 é aplicável entre o período de janeiro de 2004 e dezembro de 2005 na composição de carteiras diversificadas de investimento. Para este propósito, todos os títulos de dívida emitidos pelos governos americano, brasileiro, argentino, mexicano e venezuelano no exterior, em dólares americanos, com datas de emissão até dezembro de 2003 e vencimento superior a dezembro de 2005 foram extraídos do Euroclear Bank (?Clearing House?). Cotações e dados complementares foram obtidos do sistema de informações financeiras Bloomberg, auxiliando na filtragem dos dados. A aplicação de vários testes permitiu concluir que, em média, ao adicionar ativos de países considerados emergentes da América Latina, os portfolios apresentam retornos superiores. Testes sobre distribuição dos retornos históricos dos títulos de dívida emitidos pelo governo brasileiro foram realizados, encontrando-se que seguem uma distribuição normal. Alguns questionamentos surgiram durante o trabalho, como a influência do aumento da taxa básica de juros americana ?Fed Fund? sobre o retorno dos portfolios, a influência de legislações entre diferentes jurisdições, sendo objeto de estudos futuros.According to the article ?Effects of Financial Globalization on Developing Countries: Some Empirical Evidence?, published by the International Monetary Fund on March 17, 2003, the financial globalization, defined as na increase in the capital and investment flows between countries, contributed to the development of the fixed income international market. Financial resources to the payment of debts and investments in several productive sectors conducted Governments to use externals funding. In this context, investors interested to obtain better returns, buy securities, diversify their portfolios and they can reach gains under the coupons they received and/or capital gain. The Markowitz?s job in 1952, entitled ?Portfolio Selection?, about the relation between risk and return was the great contribution to the Modern Finance Theory. The contribution laid down on the distinction between the variability of an asset return and the impact in the portfolio risk. Markowitz? articles showed how to reach a portfolio which provides the best relation between risk and return. This present study aim to investigate whether the Markowitz?s article is applicable between January 2004 and December 2005. For this purpose, all fixed income securities issued by the American, Brazilian, Argentinean, Mexican and Venezuelan, in US Dollars, issuance date up to December 2003 and maturity date higher than December 2005 were extracted from Euroclear Bank (?Clearing House?). Quotations and additional data were obtained from Bloomberg Financial Markets. Tests were conducted to assess the portfolios and, on average, when you add securities from emerging countries at Latin America, the portfolio has a better return at the same level of risk. Distribution tests on historical returns showed normality. Some questions could not be answered, in special on the influence of raising Fed Fund rates on portfolio returns and the influence of legislations in different jurisdictions, being subject for future articles.
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Pereira, André Alexandre Galheto. "The value of information : the impact of EBA stress tests in stock markets." Master's thesis, Instituto Superior de Economia e Gestão, 2016. http://hdl.handle.net/10400.5/12926.
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Mestrado em FinançasEsta dissertação avalia o impacto dos testes de stress europeus de 2010, 2011 e 2014 realizados sob a supervisão da CEBS e da EBA, num mercado de acções constituído por grande parte do sector bancário. Para a análise é usado um modelo CAPM aumentado, levando à conclusão que o evento mais significativo para o mercado de ações é a disponibilização da metodologia, tanto em termos de risco como em retornos anormais. Em contraste, a publicação de resultados não evidencia muito impacto quando se considera toda a amostra como uma. No entanto, o tratamento da amostra em dois grupos diferentes: os bancos que passaram e os bancos que falharam, observarmos uma reação bastante significativa do mercado, nomeadamente em relação aos bancos que falharam. Os resultados deste trabalho são consistentes com a literatura desenvolvida sobre o tema, concluindo que os testes de stress produzem uma real e valiosa informação sobre o sistema bancário para os mercados.
This dissertation focus in testing if the 2010, 2011 and 2014 European Stress Tests performed under CEBS and EBA supervision produced useful and real information to the market. Using an augmented CAPM model, I found that the most significant event to the stock markets is the Methodology release, in terms of risk and returns. In contrast, the Results event did not have much impact in the same market when considering the entire sample as one. Yet treating the sample in two different groups, on one hand the banks that passed and on the other hand the banks that failed, we can observe a significant reaction of the stock markets in the last group. These findings are consistent with the literature available which conclude that the stress tests provide real and valuable to the markets about the banking system.
info:eu-repo/semantics/publishedVersion
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Li, Hao Yost Keven E. "Corporate risk and corporate governance." Auburn, Ala, 2009. http://hdl.handle.net/10415/1686.
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Backesten, Joel, and Jacob Legetth. "Vad är skillnaden mellan finansiella instrument ur en investerares perspektiv? : en kvantitativ studie om skillnader mellan olika finansiella instrument emitterade av samma bolag." Thesis, Högskolan Kristianstad, Sektionen för hälsa och samhälle, 2015. http://urn.kb.se/resolve?urn=urn:nbn:se:hkr:diva-14459.
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Syfte: Syftet med studien är att öka investerares förståelse angående hur olika finansiella instrument som emitterats av samma bolag skiljer sig åt. Inledning: Den ökade utvecklingen av de finansiella marknaderna har skapat ett ökat utbud av finansiella instrument. Flera företag har även emitterat flera olika finansiella instrument, vilket innebär att investerare står inför ett val av vilket instrument de vill exponera sig emot. Tidigare forskning är oense angående hur dessa instrument skiljer sig åt, då resultaten från tidigare studier har visat sig vara beroende på var studierna genomförs. Metod: Tidigare studier har använts som grund vid skapandet av studiens hypoteser, vilket innebär att studien är av en deduktiv karaktär. Studiens syfte innebär att stora mängder data analyseras vilket medför att studien är kvantitativ. Studien genomfördes på svenska bolag som emitterat minst två stycken finansiella instrument. Genom att skapa olika jämförelseportföljer som innehåller respektive tillgångsslag kunde vi analysera skillnaderna mellan portföljerna och därmed svara på studiens frågeställning. Resultat: Resultatet visar att det existerar skillnader mellan olika finansiella instrument som emitterats av samma bolag. Vilket innebär att investerare måste noggrant utvärdera sina valmöjligheter innan de genomför en investering, då risken är högre för finansiella instrument som har en högre rösträtt. Nyckelord: Risk, avkastning, riskjusterad avkastning, finansiella instrument, investerarePurpose: The purpose of this dissertation is to enhance investor’s understanding about the differences between various financial securities that are issued by the same company. Introduction: The development of the financial markets has created an increased range of financial securities. Same companies have also issued various financial securities, which means that the investors face the dilemma of choosing between the options. Previous researches disagree on how these various securities differ from each other, because their results have shown to be dependent on the location of investigation. Method: Previous studies have been used as the basis for the formulation of this study’s hypothesis, which means that it has a deductive character. The purpose of the study requires large amounts of data to be analyzed, which entails that a quantitative method has been used. The study has analyzed Swedish companies that have issued at least two different securities. By creating various portfolios that contain each security class we have been able to analyze the differences and to answer our research question. Conclusion: The result shows that there are some differences between various financial securities issued by the same company. This means that investor must carefully evaluate their options before implementing an investment, since the risk is greater for securities with superior voting power. Key Words: Risk, return, risk-adjusted return, financial securities, investors
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Qiao, Zhi. "Dividends, earnings and expected return in the context of consumption risk." Thesis, University of British Columbia, 2016. http://hdl.handle.net/2429/58127.
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The consumption literature of asset pricing typically considers only dividend cash
flows, based on the theoretical inference that consumption must equal dividends over the long run. Where it is commonly considered that dividends are the smooth permanent component of earnings, while earnings vary with the business cycle. Motivated by Lamont’s (1998) result that earnings and dividends have opposite effects on future return, we follow the empirical methodology of Boguth and Kuehn (2013) and find that dividend growth volatility and earnings growth volatility have opposite relationships to consumption volatility risk. We show that these opposing effects of dividends and earnings are components of the mechanism connecting consumption risk and investors’ expected return. These results offer insight for a piece of the equity premium puzzle, namely, why stock return volatility is large
compared to consumption volatility.Graduate Studies, College of (Okanagan)
Graduate
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Mokhtar, Mokhrazinim. "Measurement, management and disclosure of risk and return in Islamic banks." Thesis, University of Southampton, 2004. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.423558.
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VIANNA, EDUARDO RIBEIRO ALVES B. "RETURN, RISK E LIQUIDITY RELATIONSHIP IN FUNDS OF FUNDS PORTFOLIO CONSTRUCTION." PONTIFÍCIA UNIVERSIDADE CATÓLICA DO RIO DE JANEIRO, 2008. http://www.maxwell.vrac.puc-rio.br/Busca_etds.php?strSecao=resultado&nrSeq=12205@1.
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PONTIFÍCIA UNIVERSIDADE CATÓLICA DO RIO DE JANEIROO universo de hedge funds cresce a taxas aceleradas no Brasil já há alguns anos e vem, à medida que os juros caem, conquistando investidores que restringiam suas aplicações à renda fixa tradicional. Um outro segmento da indústria financeira vem a reboque, são os fundos de fundos. O objetivo deste trabalho é propor uma metodologia quantitativa para auxiliar na construção de portfólios de fundos de fundos que vai além do tradicional modelo de médiavariância. Será incluída uma terceira variável na avaliação dos portfólios, o risco de liquidez. Para isso, será usado como base o estudo Dyanmics of the Hedge Fund Industry do Professor Andrew W. Lo do MIT Sloan School of Management (2005). A indústria de hedge funds será dividida em diversos segmentos em função das estratégias utilizadas e em seguida, avaliaremos quais as combinações de estratégias oferecem a melhor relação Risco, Retorno e Liquidez para o investidor.
During the recent years, hedge funds in Brazil experienced an incredible increase in assets under management. Many investors are changing their asset allocation, migrating from fixed income to hedge funds. With this movement, another segment of the same industry will flourish: Funds of funds. This work main objective is to propose a methodology to help on the portfolio construction of funds of funds based not only on the relationship return and risk, but including a new parameter, liquidity. This work is based on the study Dynamics of the Hedge Fund Industry by Professor Andrew W. Lo from the MIT Sloan School of Management (2005). In order to do so, the Brazilian hedge fund industry will be divided based on the strategies used on their investments, and then an optimization process will sort out the portfolios that offer the best Return, Risk and Liquidity combination for investors.
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Shih-Jung, Cheng, and 鄭詩蓉. "The Effects of Banking Diversification on Risk, Return and risk-adjusted returns in Taiwan." Thesis, 2001. http://ndltd.ncl.edu.tw/handle/55670564127146930940.
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碩士淡江大學
會計學系
89
When banking in Taiwan positively predispose management to diversification, it wonders whether diversification is of benefit to reduce risk and increase returns. To decrease risk, Tzung, Lee-Hsin conceives of the diversification as effective, according to the survey in the past; but, to increase returns, it is of no effect as indicated by the result of Cheng-Ho, Peng’s study. Based on both of the theories of “Resource-Based Theory” and “ Portfolio Theory”, diversification is advantageous to lessen risk and increase returns, an effect that has not been absolutely attained for a short period of time but long-term. Accordingly, analyzed discretely in perspective of financial performance and investors, this study focus on the behavioral patterns of the standard banks, on Taiwan Stock Exchange and Over the Counter Markets, and investigates whatever influence the diversification can have on risk, returns and risk-adjusted returns. Primarily, the study examines if there is any consistency in the annual diversification, influencing every returns and risk. In the light of the status of consistency, this study, by either Cross-Sectional Analysis or Time-Series and Cross-Sectional Regression, scrutinizes the diversified degree for influence on risk, returns and risk-adjusted returns. The consequence of this study indicates that: 1.- The influence of diversification upon both risk and returns don’t consist with each other annually but remarkably on system risk-adjusted returns (ROA and ROE). 2.-The diversification in 1995 and 1996 has few influence on risk, returns and risk-adjusted returns. After 1997, the diversified degree has distinguishably positive relation to increase both returns and risk-adjusted returns but negative to lessen risk. It means that comparatively, the banks in the higher diversified degree gain ascendancy over the others on better performance and less risk. This process avers that the effect of diversification just can be carried out in the long-term period of time instead of the short one. 3.- It is distinguishing that diversification is positively related to both system risk-adjusted ROA and ROE. In other words, compared with the others affected by an industrial recession, the banks in the higher diversified degree don’t vary much in the returns of covariance. It draws a conclusion from this study that banking diversification is a correct decision with effect, not only dispelling risk but also making better performance. The inventors intending to make an investment in banking, it will be a proper choice to target the banks, which are in the higher diversified degree.
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Peng, I.-Ting, and 彭怡婷. "Credit risk in equity return." Thesis, 2006. http://ndltd.ncl.edu.tw/handle/46175570605803978154.
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碩士國立臺灣大學
會計學研究所
94
The purpose of this study is to examine the relationship between credit risk and the subsequent stock returns. I use TEJ''s TCRI as a proxy variable to the credit risk. In the security returns tests, the effects on market value and market-to-book ratio were controlled. Finally, a contrarian strategy was built by adding credit risk variable. The t-test was applied to examine the relationship between stock return and its credit risk. Furthermore comprehensive scores without artificial adjustments were added to replace TCRI for the t-tests. In analyzing investment tactics, the t-test was applied on financial statement announcement date, and applied regression self-assessed income. The results show: 1.In contrast with the popularity of growth and large-cap stocks among individual securities, medium stocks with medium market-to-book ratio, small stocks with lower market-to book-ratio, and medium stocks with lower market-to-book ratios have higher returns. 2.The contrarian strategy is suitable for the stock market in Taiwan. We also find significantly greater returns associated with applying the contrarian strategy in January than that in April.
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Hu, Wei-Chen, and 胡煒珍. "Prospect Theory and Risk-return Association." Thesis, 2003. http://ndltd.ncl.edu.tw/handle/88163637121506010852.
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碩士國立中央大學
財務金融研究所
91
Generally asset-pricing theories assert a positive risk-return trade-off relationship, which implies that firms are risk-averse. However, Bowman (1980), documents a negative, instead of a positive, relationship between risk and return based on accounting data on firms from 85 U.S. industries. Several studies have shown that the risk-return paradox can be explained based on Kahneman and Tversky’s (1979) prospect theory. Prospect theory argues that individuals use target or reference points in evaluating risky choices. In this article, to conform to the spirit of the prospect theory, I will reexamine the risk-return relationship by running regressions for firms below and above the target level based on returns over a past ranking sample period. I found that the prospect theory is not as strong as the traditional literature has shown.
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Singh, Shishir. "Return, risk and diversification of Canadian stocks." Thesis, 2007. http://spectrum.library.concordia.ca/975290/1/NR30151.pdf.
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This thesis examines three major issues dealing with the risk of Canadian stocks. The first issue is what are the differences in various measures of idiosyncratic volatility (IV) and is this risk priced. To this end, various measures of realized, conditional and idiosyncratic volatility are examined for Canadian stocks for the 1975-2003 period. As for other markets, smaller firms exhibit higher total and idiosyncratic risks than their larger counterparts, and IV accounts for almost three-quarters of total volatility for the six studied samples. Unlike other markets, Canadian IT firms exhibit considerably lower volatilities. The relationship between returns and IV is examined using various approaches with(out) the presence of control variables for liquidity and firm-specific information embedded in stock prices. The conditional relation between returns and asymmetric IV is highly significant, robust and as expected (i.e., positive and negative for correspondingly signed excess returns). The second issue is whether a minimum portfolio size (PS) should be prescribed to achieve a naively but sufficiently well-diversified portfolio for investment opportunity sets (un)differentiated by cross-listing status and market capitalization. To this end, various (un)conditional metrics are used to measure diversification benefits for stocks listed on the TSX for 1975-2003. The minimum PS is found to depend upon the chosen investment opportunity set, the metric(s) for measuring diversification benefits, and the criterion for determining when the portfolio is sufficiently well diversified. The third (final) issue is to re-examine volatility transmission for stocks cross-listed in synchronous markets. To this end, four bi-variate GARCH models are used to examine contemporaneous co-movement, asymmetry and volatility transmission effects for equal (value-)weighted daily returns for Canadian stocks cross-listed on the TSX and U.S. markets for 1975-2003. Contemporaneous and asymmetric comovements decrease during the 1990s and increase thereafter, mostly due to the entrance of new (and smaller) stocks into both national markets. Conclusions about the directional change of asymmetric volatility spillovers depend upon the choice of GARCH model. Thus, a researcher should use more than one multivariate GARCH model in order to draw robust inferences on cross-market volatility dynamics
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Chen, Hsien-Ming, and 陳賢名. "Idiosyncratic Risk, Return Skewness and Corporate Governance." Thesis, 2009. http://ndltd.ncl.edu.tw/handle/16041616361891962344.
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博士國立高雄第一科技大學
管理研究所
97
Most of prior studies mainly focus on whether the corporate governance mechanisms can reduce agency problems for improving firms’ performance and shareholders’ wealth. However, they pay less attention on how the quality of corporate governances impact on reducing firms’ risk. This study investigates how both internal and external corporate governance mechanisms impact firms’ idiosyncratic risk, return skewness based on the Taiwanese data. We expect to find out the key corporate governance mechanisms which can reduce firms’ related risk. This study takes the GARCH effects into consideration and further modifies the measurement of idiosyncratic risk proposed by Xu & Malkiel (2003); estimates the return skewness based on the methodologies of Bae, et al. (2006). By the way, this study considers the internal and external corporate governances, such like ownership structure, board composition, managerial incentive, information transparency, legal infrastructure, and product market competition, will be used to evidence how they impact on firms’ idiosyncratic risk and return skewness through our panel data model. The contributions of this study are, first, find out the key corporate governance mechanisms that can reduce firms’ risk and improve firms’ risk management through investigating how the internal and external corporate governance mechanisms influence firms’ idiosyncratic risk and return skewness. Second, this study extends the studies in corporate governance and risk management, and provides empirical evidences to the literature and suggestions to the market participants. This study indicates that higher quality of internal corporate governance can decrease firms’ idiosyncratic risk, make return distribution less negative skewed. Hence, we propose the corporate governance should be respected by Taiwan listed firm for reducing stock price volatility and avoiding the occurrence of negative extreme return.
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Tsai, Ta-Jen, and 蔡大任. "The relationship between idiosyncratic risk and return." Thesis, 2013. http://ndltd.ncl.edu.tw/handle/21318352502191204985.
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碩士銘傳大學
財務金融學系碩士班
101
This research examining the explanation power of idiosyncratic risk on MSCI Taiwan index of stocks, sample period during on January 2003 to December 2012. All stocks divided industries into electronics, financial and traditional industries. The empirical results show that the idiosyncratic risk makes a significantly positive effect to the return in the while period. In terms of classification for industries, financial, electronic and traditional industries have no significantly explanation power to return . In addition, prior to the financial crisis, the idiosyncratic risk of the three industries didn’t found a significant relationship to return；after the financial crisis, just the financial industry’s idiosyncratic risk have a significantly positive relationship to return.
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Hung, Wang-Tin, and 洪宛婷. "Does the Idiosyncratic Risk Forecast the Return?" Thesis, 2010. http://ndltd.ncl.edu.tw/handle/50679329238153904101.
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碩士國立高雄第一科技大學
風險管理與保險研究所
99
Goyal and Santa-Clara (2003) investigate the relation between the average stock volatility and the portfolio returns on the American stocks for the period of 1963:08 to 1999:12 and find a significantly positive relation between them on the American stocks. Bali et al. (2005) extend the investigation period to 1963:08 to 2001:12, and find a significantly positive relation between the average stock volatility and the portfolio returns only on the NASDAQ stocks, which is driven in part by liquidity premium. Bali et al. (2005) argue the results from Goyal and Santa-Clara (2003) are not robust across different stock portfolios and sample period, as well as the inappropriate of methodology. This study follows the method of Bali et al. (2005) and adopts GARCH model, which capture the time-varying property in idiosyncratic risk to reexamine the relation. Empirical evidences show no matter how the idiosyncratic risk was evaluated or how the portfolio was formed, the relation is insignificant between the excess return and the lagged idiosyncratic risk. Moreover, we rank samples based on the idiosyncratic risk and reexamine the relation. Our evidence is solid and robust.