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1
Yao, Juan. "A dynamic investigation into the predictability of Australian industry stock returns." Thesis, Curtin University, 2004. http://hdl.handle.net/20.500.11937/1067.
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This thesis involved an empirical investigation of the predictability of Australian industrial stock returns using a dynamic state-space framework. The systematic risks of industrial portfolios were examined in a stochastic market- model. The systematic risks of industry portfolios are found to be stochastic processes. Most of the industry groups have time-varying systematic risks that are mean-reverting to their stable or moving long-term mean. However, the investment and financial services, alcohol and tobacco, gold, insurance and media industry groups have rather random systematic risks. The time-varying market model provides a better explanation of the portfolio returns than the single-index model since it captures the stochastic properties of market risk. Further, a Bayesian dynamic-forecasting model was employed to examine the explanatory power of a set of economic and financial variables. The unanticipated components of the term-structure variable, the interest-rate variable and the aggregate-dividend-yield variable were shown to be significant in explaining the industry portfolio excess returns. The comparison between multivariate analysis and univariate analysis strongly indicates that the correlations within industries are critical in the investigation of the predictability of returns. In the out-of-sample analysis, a maximally predicted portfolio (MPP) was constructed based on the updated economic and financial information; however, the predictability of the MPP did not exceed that of a naive forecast.Furthermore, the market timing ability associated with the predictability of the MPP was insignificant. The industry-group-rotation strategy is able to enhance the industry portfolio performance, but the predictability only contributes a small proportion of the profits. The results indicate that the industry returns contain predictive components; however, investors are less likely to exploit the existing predictability to gain excess profit. The level of predictability discovered here does not contradict market-efficiency theory.
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Wu, Ruojun. "Essays on the predictability and volatility of returns in the stock market." Diss., Connect to a 24 p. preview or request complete full text in PDF format. Access restricted to UC campuses, 2008. http://wwwlib.umi.com/cr/ucsd/fullcit?p3316421.
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Thesis (Ph. D.)--University of California, San Diego, 2008.Title from first page of PDF file (viewed Sept. 4, 2008). Available via ProQuest Digital Dissertations. Vita. Includes bibliographical references (p. 127-132).
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Yao, Juan. "A dynamic investigation into the predictability of Australian industry stock returns." Curtin University of Technology, School of Economics and Finance, 2004. http://espace.library.curtin.edu.au:80/R/?func=dbin-jump-full&object_id=15148.
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This thesis involved an empirical investigation of the predictability of Australian industrial stock returns using a dynamic state-space framework. The systematic risks of industrial portfolios were examined in a stochastic market- model. The systematic risks of industry portfolios are found to be stochastic processes. Most of the industry groups have time-varying systematic risks that are mean-reverting to their stable or moving long-term mean. However, the investment and financial services, alcohol and tobacco, gold, insurance and media industry groups have rather random systematic risks. The time-varying market model provides a better explanation of the portfolio returns than the single-index model since it captures the stochastic properties of market risk. Further, a Bayesian dynamic-forecasting model was employed to examine the explanatory power of a set of economic and financial variables. The unanticipated components of the term-structure variable, the interest-rate variable and the aggregate-dividend-yield variable were shown to be significant in explaining the industry portfolio excess returns. The comparison between multivariate analysis and univariate analysis strongly indicates that the correlations within industries are critical in the investigation of the predictability of returns. In the out-of-sample analysis, a maximally predicted portfolio (MPP) was constructed based on the updated economic and financial information; however, the predictability of the MPP did not exceed that of a naive forecast.Furthermore, the market timing ability associated with the predictability of the MPP was insignificant. The industry-group-rotation strategy is able to enhance the industry portfolio performance, but the predictability only contributes a small proportion of the profits. The results indicate that the industry returns contain predictive components; however, investors are less likely to exploit the existing predictability to gain excess profit. The level of predictability discovered here does not contradict market-efficiency theory.
4
Kwan, Yim-Sheung Sabrina. "The predictability of long-horizon stock market returns in the UK." Thesis, London Business School (University of London), 1996. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.321802.
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Li, Yanhui. "Predictability in the New Zealand Stock Market." Thesis, University of Canterbury. The Department of Economics and Finance, 2015. http://hdl.handle.net/10092/10755.
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Recent financial literature suggests that the variation in the dividend–price ratio is significantly related to the expected returns but not to the expected dividend growth. In other words, stock returns are predictable but dividend growth is not. However, most of this evidence comes from the U.S. at the aggregate level, and there is a lack of research that relates to this topic in the New Zealand stock market. This research examines the predictive power of the dividend–price ratio using New Zealand stock market data from 1931 to 2012. The results confirm the claim in the U.S data that returns are predictable but dividend growth is not in the New Zealand stock market data. This research also investigates whether the return predictability is associated with risk-pricing or mispricing; whether the return predictability is due to the fundamental relationship among the dividend–price ratio, future returns and future dividend growth, or whether it is due to the effects of historical events; whether out-of-sample forecasts will have the same patterns as in-sample predictions; and whether individual company returns are predictable.
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Watkins, Boyce Dewhite. "Investor Sentiment, Trading Patterns and Return Predictability." The Ohio State University, 2002. http://rave.ohiolink.edu/etdc/view?acc_num=osu1038859045.
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Rey, David. "Stock market predictability and tactical asset allocation /." [S.l. : s.n.], 2004. http://www.gbv.de/dms/zbw/470721448.pdf.
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Thammaraks, Angsu-apa. "Stock market anomalies and return predictability on the stock exchange of Thailand." Thesis, University of Exeter, 2000. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.312080.
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Svensson, Louise, and Andreas Soteriou. "Testning the Adaptive Market Hypothesis on the OMXS30 Stock Index: 1986-2014 : Stock Return Predictability And Market Conditions." Thesis, Internationella Handelshögskolan, Högskolan i Jönköping, IHH, Företagsekonomi, 2017. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-36577.
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We evaluate the validity of the Adaptive Market Hypothesis (AMH) in a Swedish context by testing for stock return predictability on the OMXS30 stock index between 1986 and 2014 using daily returns and monthly two year moving subsamples. To our knowledge, this is the first study to evaluate the AMH in a Swedish context. Three tests for linear independence based on Lo and MacKinlay (1988) variance ratio test, namely the Chow and Denning joint test as well as Wright (2000) joint rank and sign tests are used. We also test for non-linear independence using the BDS test statistics. Presented in our findings is evidence of time-varying predictability where stock returns go through periods of return predictability and non-predictability. When evaluating the different market conditions (volatility, bull, bear, up, down and normal markets) we find that these different market conditions govern the degree of stock return predictability in different ways. Our findings support the AMH on the OMXS30 stock index and in contrast to previous research regarding market efficiency on the Swedish stock market, we do not find persistent stock return predictability over the short and long term.
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Ullah, Saif, and Waqar Ahmad. "Predictability power of firm´s performance measures to stock returns: A compatative study of emerging economy and developed economies stock market behavior." Thesis, Karlstads universitet, Fakulteten för ekonomi, kommunikation och IT, 2011. http://urn.kb.se/resolve?urn=urn:nbn:se:kau:diva-7866.
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The stock market returns are the readily available tool for the investor to make investment decision and stock market return are affected by many accounting variables. Dividend policy measures and stock return relationship has been examined from decades but result is still a dilemma. This study is a step forward to solve this dilemma by considering Karachi stock exchange, Pakistan and Nordic stock markets and conducting a comparative study to also provide a knowledge base to readers. Dividend yield ratio, dividend payout ratio and other accounting variables are examined to find their effect on stock return. Pooled least square regression has been used on the data ranging from 2005-2008 and findings are different in different markets. Dividend policy measures (dividend yield ratio and dividend payout ratio) have significant effect on the stock return and in most countries there is significant negative relationship.
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Liu, Yuna. "Essays on Stock Market Integration - On Stock Market Efficiency, Price Jumps and Stock Market Correlations." Doctoral thesis, Umeå universitet, Nationalekonomi, 2016. http://urn.kb.se/resolve?urn=urn:nbn:se:umu:diva-119873.
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This thesis consists of four self-contained papers related to the change of market structure and the quality of equity market. In Paper [I] we found, by using of a Flexible Dynamic Component Correlations (FDCC) model, that the creation of a common cross-border stock trading platform has increased the long-run trends in conditional correlations between foreign and domestic stock market returns. In Paper [II] we study whether the creation of a uniform Nordic and Baltic stock trading platform has affected weak-form information efficiency. The results indicate that the stock market consolidations have had a positive effect on the information efficiency and turnover for an average firm. The merger effects are, however, asymmetrically distributed in the sense that relatively large (small) firms located on relatively large (small) markets experience an improved (reduced) information efficiency and turnover. Although the results indicate that changes in the level of investor attention (measured by turnover) may explain part of the changes in information efficiency, they also lend support to the hypothesis that merger effects may partially be driven by changes in the composition of informed versus uninformed investors following a stock. Paper [III] analyzes whether the measured level of trust in different countries can explain bilateral stock market correlations. One finding is that generalized trust among nations is a robust predictor for stock market correlations. Another is that the trust effect is larger for countries which are close to each other. This indicates that distance mitigates the trust effect. Finally, we confirm the effect of trust upon stock market correlations, by using particular trust data (bilateral trust between country A and country B) as an alternative measurement of trust. In Paper [IV] we present the impact of the stock market mergers that took place in the Nordic countries during 2000 – 2007 on the probabilities for stock price jumps, i.e. for relatively extreme price movements. The main finding is that stock market mergers, on average, reduce the likelihood of observing stock price jumps. The effects are asymmetric in the sense that the probability of sudden price jumps is reduced for large and medium size firms whereas the effect is ambiguous for small size firms. The results also indicate that the market risk has been reduced after the stock market consolidations took place.
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Bai, Qing. "Essays on Stock Return Predictability: Novel Measures Based on Technology Spillover and Firm's Public Announcement." University of Cincinnati / OhioLINK, 2014. http://rave.ohiolink.edu/etdc/view?acc_num=ucin1406820121.
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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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Alitab, Dario. "Discrete time models for financial volatility and jumps." Doctoral thesis, Scuola Normale Superiore, 2017. http://hdl.handle.net/11384/85716.
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Rytchkov, Oleg. "Essays on predictability of stock returns." Thesis, Massachusetts Institute of Technology, 2007. http://hdl.handle.net/1721.1/42333.
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Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2007.Includes bibliographical references.
This thesis consists of three chapters exploring predictability of stock returns. In the first chapter, I suggest a new approach to analysis of stock return predictability. Instead of relying on predictive regressions, I employ a state space framework. Acknowledging that expected returns and expected dividends are unobservable, I use the Kalman filter technique to extract them from the observed history of realized dividends and returns. The suggested approach explicitly accounts for the possibility that dividend growth can be predictable. Moreover, it appears to be more robust to structural breaks in the long-run relation between prices and dividends than the conventional OLS regression. I show that for aggregate stock returns the constructed forecasting variable provides statistically and economically significant predictions both in and out of sample. The likelihood ratio test based on a simulated finite sample distribution of the test statistic rejects the hypothesis of constant expected returns at the 1% level. In the second chapter, I analyze predictability of returns on value and growth portfolios and examine time variation of the value premium. As a major tool, I use the filtering technique developed in the first chapter. I construct novel predictors for returns and dividend growth on the value and growth portfolios and find that returns on growth stocks are much more predictable than returns on value stocks. Applying the appropriately modified state space approach to the HML portfolio, I build a novel forecaster for the value premium. Consistent with rational theories of the value premium, the expected value premium is time-varying and countercyclical. In the third chapter, based on the joint work with Igor Makarov, I develop a dynamic asset pricing model with heterogeneously informed agents.
(cont.) I focus on the general case in which differential information leads to the problem of "forecasting the forecasts of others" and to non-trivial dynamics of higher order expectations. I prove that the model does not admit a finite number of state variables. Using numerical analysis, I compare equilibria characterized by identical fundamentals but different information structures and show that the distribution of information has substantial impact on equilibrium prices and returns. In particular, asymmetric information might generate predictability in returns and high trading volume.
by Oleg Rytchkov.
Ph.D.
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Klähn, Judith. "The predictability of German stock returns /." Wiesbaden : Wiesbaden : Deutscher Universitäts-Verlag ; Gabler, 2000. http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&doc_number=008969264&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA.
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Zevallos, Mauricio, and Carlos del Carpio. "Metal Returns, Stock Returns and Stock Market Volatility." Economía, 2015. http://repositorio.pucp.edu.pe/index/handle/123456789/118122.
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Given the extensive participation of mining stocks in the Peruvian stock market, the Lima Stock Exchange (BVL) provides an ideal setting for exploring both the impact of metal returns on mining stock returns and stock market volatility, and the comovements between mining stock returns and metal returns. This research is a first attempt to explore these issues using international metal prices and the prices of the most important mining stocks on the BVL and the IGBVL index. To achieve this, we use univariate GARCH models to model individual volatilities, and the Exponentially Weighted Moving Average (EWMA) method and multivariate GARCH models with time-varying correlations to model comovements in returns. We found that Peruvian mining stock volatilities mimic the behavior of metal volatilities and that there are important correlation levels between metals and mining stock returns. In addition, we found time-varying correlations with distinctive behavior in different periods, with rises potentially related to international and local historical events.Dada la amplia participación de acciones mineras en el mercado de valores peruano, la Bolsa de Valores de Lima (BVL) resulta un escenario ideal para explorar tanto el impacto de los ren- dimientos de acciones de metales en los rendimientos de las acciones mineras y la volatilidad del Mercado de valores, así como los co-movimientos entre los rendimientos de las acciones mineras y los rendimientos de los metales. Este estudio es un primer intento en explorar estos temas usando precios internacionales de los metales y los precios de las acciones mineras más importantes de la BVL y del índice IGBVL. Para conseguir esto, hemos usado modelos GARCHunivariados para modelar las volatilidades individuales, y el método de Media Móvil Ponderada Exponencialmente (EWMA) y modelos GARCH multivariados con correlaciones de variantes en el tiempo a modelos de co-movimientos en rendimientos. Hemos encontrado que las volatilidades imitan el comportamiento de las volatilidades de los metales y que hay importantes niveles de correlación entre los metales y el retorno de las acciones mineras. Adicionalmente, encontramos correlaciones variantes en el tiempo con un comportamiento distintivo en periodos diferentes, el que aumenta potencialmente en relación con eventos históricos internacionales o nacionales.
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Gabuniya, Tymur. "Three essays on economics of predictability of stock returns." Doctoral thesis, NSBE - UNL, 2012. http://hdl.handle.net/10362/11839.
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A PhD Dissertation, presented as part of the requirements for the Degree of Doctor of Philosophy from the NOVA - School of Business and EconomicsIn the first essay of this dissertation I analyze predictability of returns generated by the long-run risks model of Bansal and Yaron (2004). I uncover some counterfactual features of the predictability and connect them with the specific features of the long- run risks processes. In the second essay, I analyze the effect of the aggregation on the predictability in the long-run risks model. I found that the aggregation implies that a part of expected dividend growth is observable and points at the nature of the additional to the dividend-price ratio variables which might help to predict returns. In the third essay, I use expected returns and expected dividend growth processes implied by the long-run risks and other models to analyze the out-of-sample performance of the predictive regression and some of its alternatives. My analysis suggests that the poor out-of-sample performance is due to the finite sample noise and a large unpredictable component in returns.
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Eliasson, Martin, Khawar Malik, and Benjamin Österlund. "A Value Relevant Fundamental Investment Strategy : The use of weighted fundamental signals to improve predictability." Thesis, Uppsala universitet, Företagsekonomiska institutionen, 2011. http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-145255.
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The aim of this study is to investigate the possibility to improve the investment model defined in Piotroski (2000) and the subsequent research carried out on this model. Our model builds further upon the original fundamental score put forth by Piotroski. This further developed model is tested in two different contexts; firstly, a weighted fundamental score is developed that is updated every year in order to control for any changes in the predictive ability of fundamental signals over time. Secondly, the behavior of this score is analyzed in context of recession and growth cycles of the macro economy. Our findings show that high book-to-market portfolio consist of poor performing firms, as shown by Fama and French (1995) and is thereby outperformed by both Piotroski's F_score and our own developed scores. The score based on a rolling window correlation is performing a little better then F_score, but the score based on correlations for prior Up and Down periods is not. The conclusions we draw from the results are that improvements have to be made, both to F_score and our own developments, to sort winners from loser to get an even more profitable zero-investment hedge strategy.
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Ardison, Kym Marcel Martins. "Nonparametric tail risk, macroeconomics and stock returns: predictability and risk premia." reponame:Repositório Institucional do FGV, 2015. http://hdl.handle.net/10438/13666.
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This paper proposes a new novel to calculate tail risks incorporating risk-neutral information without dependence on options data. Proceeding via a non parametric approach we derive a stochastic discount factor that correctly price a chosen panel of stocks returns. With the assumption that states probabilities are homogeneous we back out the risk neutral distribution and calculate five primitive tail risk measures, all extracted from this risk neutral probability. The final measure is than set as the first principal component of the preliminary measures. Using six Fama-French size and book to market portfolios to calculate our tail risk, we find that it has significant predictive power when forecasting market returns one month ahead, aggregate U.S. consumption and GDP one quarter ahead and also macroeconomic activity indexes. Conditional Fama-Macbeth two-pass cross-sectional regressions reveal that our factor present a positive risk premium when controlling for traditional factors.
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Mohamed, El-Emam A. E. "Analysis of behaviour and predictability of stock returns and volatility on the Egyptian stock exchange." Thesis, University of York, 2005. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.422541.
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Mesomeris, Spyros. "Three essays on stock returns predictability and trading strategies to exploit it." Thesis, City University London, 2004. http://openaccess.city.ac.uk/8436/.
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This thesis is organized in three self-contained projects which model predictability in both advanced and emerging stock markets and attempt to exploit it via construction of appropriate trading strategies. The objectives of this research are: 1) to model mean reversion in developed stock markets and re-assess the mixed empirical findings to date; 2) to characterize the returns generating process in emerging capital markets and examine the predictive ability and profitability of technical trading rules; 3) to develop and evaluate whether trading strategies involving dividend announcements in the UK are profitable and can be classified as statistical arbitrages, with consequent implications for the market efficiency hypothesis. We investigate the existence of mean reversion in the G-7 economies using a two factor continuous time model for national stock index data. Whilst maintaining the same modeling philosophy of previous studies, we rather focus on the effects of the "intrinsic" continuous time mean reverting coefficient. Our method produces support for mean reversion, even at low frequencies, and relatively small samples. We also aim to characterize the stock return dynamics in four Latin American and four Asian emerging capital market economies and assess the profitability of popular trading rules in these markets. We find that dollar denominated returns exhibit statistically significant long memory effects in volatility but not in the mean. "wading' our findings via a number of moving average and trading range break rules, we "beat" the buy and hold benchmark strategy in all markets before transaction costs, and in Asian markets even after transaction costs. Bootstrap simulations further reinforce the choice of the modeling framework and the trading outcomes, particularly for Latin American markets. Finally, we investigate whether trading strategies designed to exploit "abnormal" price behavior following dividend initiation/resumption and omission announcements of UK firms pass the statistical arbitrage test of Hogan et al. (2004). To mitigate concerns regarding "risky" arbitrage, we also calculate the probability of making a loss for each strategy. We find that strategies involving portfolios of dividend initiating/resuming firms are profitable and converge to riskless arbitrages over time, while this is not the case for strategies with dividend omitting firms, contrary to what is suggested by US studies. In general, the robustness of our results casts doubt on the market efficiency hypothesis in both developed and emerging capital markets.
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Costa, Pedro Miguel Mendes Rosa. "Central bank independence and stock market returns." Master's thesis, Instituto Superior de Economia e Gestão, 2015. http://hdl.handle.net/10400.5/10466.
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Mestrado em FinançasA independência dos bancos centrais é considerada tanto pela literatura como pelos decisores políticos como essencial para atingir estabilidade nos níveis de inflação estável e bem estar económico a longo prazo nas economias modernas. Geralmente, é uma teoria suportada pela ideia de que a independência dos bancos centrais permite atingir essa estabilidade sem prejudicar outras variáveis da economia. Até agora, e salvo raras exceções, os estudos feitos pela literatura sobre a relação da independência dos bancos centrais e as variáveis macroeconómicas têm negligenciado os retornos agregados dos mercados financeiros. Usando um conjunto de 21 países desenvolvidos, calculamos os respetivos retornos dos índices financeiros utilizando os índices MSCI, cotados em dólares americanos, e testamos se é possível encontrar algum impacto causado pelos vários níveis de independência dos bancos centrais. A nossa análise abrange um período de 20 anos e os resultados levam-nos a concluir que a hipótese de "free lunch" que acompanha os defensores da independência dos bancos centrais não é rejeitada quando estudamos o seu impacto nos retornos dos mercados financeiros.
Central bank independence is regarded by both literature and policymakers as essential for achieving stability in inflation and long term welfare in modern economies, and it is usually supported by the idea that it accomplishes such stability without harming other variables in the economy. Until very recently, the literature studies of its effect on several macroeconomic variables have neglected the analysis of stock market returns. Using a set of 21 developed countries, we calculate the respective yearly stock returns using the MSCI indices, quoted in US Dollars, and test if it is possible to trace an impact caused by the levels of independence of the countries' central banks. Our analysis spans for a period of 20 years and the results lead us to conclude that the free lunch hypothesis behind central bank independence cannot be rejected when its impact is studied on stock market returns.
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Suomala, T. (Taneli). "Interest rate spreads and stock market returns." Master's thesis, University of Oulu, 2013. http://urn.fi/URN:NBN:fi:oulu-201308301660.
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This thesis studies systematic risk factors and return predictability in the Finnish stock market. The purpose is to test whether global Fama French factors and three interest rate spreads are risk factors that explain the cross sectional variation of excess returns in the Finnish stock market. The thesis also studies whether these factors are variables that forecast excess stock returns in the Finnish market. Research method is a linear factor pricing model, where excess returns are explained with these six risk factors.
Main result of this study is that global Fama French factors, term spread and treasury spread are variables that can be used as systematic risk factors for explaining returns in the Finnish stock market. These variables explain about half of the cross sectional variation of excess returns in the Finnish market. Results regarding excess market return are unambiguous whereas results regarding SMB, HML, term spread and treasury spread vary along the estimated indices. Results of return predictability show that term spread and treasury spread are variables that forecast returns in the Finnish stock market.
Limitation of this study is that these results are not supported with out of sample tests. Therefore these results cannot be generalized. Results of this study inspires to further research which would help to evaluate whether these variables can be used as systematic risk factors in other regional markets in addition to Finnish stock market.
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Chen, Haojun. "Three essays on financial market predictability." Thesis, University of Manchester, 2017. https://www.research.manchester.ac.uk/portal/en/theses/three-essays-on-financial-market-predictability(b78fcbba-3858-4dce-8b7b-4c6dc035325d).html.
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Prior studies have shown that returns exhibit certain predictable patterns that are inconsistent with the mainstream finance theory. In this thesis, I explore the behaviour of returns following three different types of market events with a particular focus on behavioural and non-behavioural factors that are attributable to the predictability of post-event returns. This thesis consists of three self-contained empirical essays. The first essay examines the information role of large S&P500 futures trades (commercial, noncommercial, dealers, asset managers, and hedge funds) in shaping future index returns. I find that commercial firms’ net trading level appears positively correlated with future index returns but the relationship is not stable across time. Based on more recent data, hedge funds appear superior in terms of access to information and/or trading ability but this advantage is only preserved at high frequency. Therefore, the current weekly Commitment of Traders (COT) report - published with a three-day delay - prevents timely public access to this type of information. Also, trading signals based on two of the more popular position-based sentiment indicators do not produce significant average returns. Overall, this calls into question the reliability of COT-based trading signals used by market professionals. The second essay studies the impacts of short sellers’ trading in shaping the behaviour of stock returns following extreme price moves using data from stock market in mainland China where short sales were initially prohibited. Extreme price moves occurring under non-prohibitive/prohibitive short-sale constraints are defined as shortable/non-shortable events. I find shortable events exhibit less post-event price drift/reversals than non-shortable ones, indicating an increase in the efficiency of stock prices reacting to unexpected events. Further analysis of short sellers’ trading activities on the price event days suggests that they are successful in trading informed price shocks but not in trading uninformed ones. Finally, I find evidence of massive short-covering that amplifies price shocks. The third essay investigates investors’ reaction to stock market rumours using data from China where listed companies are required to clarify rumours appearing in the media. I find that post-clarification abnormal returns exhibit continuation of pre-clarification momentum for rumours that are not denied by the listed companies and reversals for those which are denied. These results suggest that investors are unable to distinguish the reliable rumours from the false ones, as they under-react to rumours containing material information and over-react to those without. Further regression analyses on post-clarification abnormal returns using various subsamples of rumour events show that investors respond more efficiently to rumours when they are more informed about news topics or the rumoured companies.
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AlQatamin, Ma'en Mardi. "The behaviour of stock returns in Amman stock market : a thin emerging market." Thesis, University of Warwick, 1997. http://wrap.warwick.ac.uk/36311/.
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In this thesis the behaviour of stock returns of firms listed on the Amman Stock Market is examined. The thin trading characteristic of the market is emphasised and its possible effects on empirical investigations are analysed. The first four chapters contain a review of the literature on the importance of stock markets, the Efficient Market Theory and the Capital Asset Pricing Model. The literature suggests that the allocative efficiency of funds via stock markets is related to the operational and pricing efficiency of these markets. In such an efficient market, the expected return on an investment is related only to its risk. Chapter 5 tests the weak form efficiency of the ASM with particular emphasis on the problem of thin trading. To achieve this, three alternatives for filling missing data gaps are examined. In particular, it was found that extrapolation, based on market movements, induces more dependence patterns. Yet, Examining the other two alternatives, using daily price changes, statistical inefficiencies were detected, on the one day level. Fewer dependence pa%erns were repored br \onger rnerva'1s. The reported first order positive serial correlation can coriseqnence. o'i 'p'icrng uirrxs imposed on trading in the market. Chapter 6 provides a database of individual stock and market returns. Compiling this database was a major contribution of this research. Chapter 7 investigates the effects of different return measurement and beta estimation approaches on tests of the CAPM. Specifically, the evidence indicates that the use of different return measurement approaches can affect the results of tests of this equilibrium model. Also, the adjustment of the trade-to-trade method, used for beta estimation, reduces heteroscedasticity resulting from using non equal time intervals when applying the market model. The first part of chapter 8 provides an investigation of the sensitivity of the results, of CAPM tests, to the length of the period used to estimate beta. The results suggest that the longer the period, used to estimate beta, the more are the reported deviations from the implied relationships of the model. The second part of Chapter 8 provides a test of the CAPM using pooled data, and employing four lengths of periods to estimate beta. The evidence was not consistent with the model. But, when specific attention was given to the problem of thin trading, by constructing sub samples of the most traded stocks, the validity of the model was established. However, this was only the case when beta is estimated using 24 months of past returns, suggesting that market risk in Jordan changes fairly rapidly. Chapter 9 investigates the power of some firm-specific variables in explaining the cross section of stock returns on the ASM. The evidence suggests that the book value, earnings, leverage and the firm size, do not help in explaining the cross section variation of firms listed on the ASM. This evidence is in accord with the CAPM.
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Wells, Heather Joanna. "Stock market trend behaviour and continuation and reversal effects in stock market returns." Thesis, Bangor University, 2004. https://research.bangor.ac.uk/portal/en/theses/stock-market-trend-behaviour-and-continuation-and-reversal-effects-in-stock-market-returns(5279ca3b-93e9-41c2-a409-d417e8ba85db).html.
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This thesis considers the existence of, and potential causes of, continuation and reversal effects in stock market returns. In the first part of the research, a timeseries approach is used to consider the profitability of momentum trading strategies on fourteen major stock market indices. Momentum trading strategies exploit continuation in returns, and evidence of significant profits to such strategies therefore implies the presence of continuation effects in the data samples. Significant losses to momentum strategies, on the other hand, are indicative of reversal effects in returns. This part of the research identifies continuation effects in stock index returns over periods of 1 trading day and 10 through 252 trading days. The second part of the research explores the various behavioural and nonbehavioural theories proposed in the literature for the existence of continuation and reversal effects in returns. Such effects imply that stock market trends differ systematically from trends in random data with the same underlying distribution of daily returns. An algorithm from the information technology literature is adapted and used to identify turning points in trends in the fourteen data sets, and the statistical properties of daily returns within stock market trends are analysed. Important patterns are observed in the steepness of trends and the volatility of returns within trends as they develop. These patterns enable some inferences to be drawn as to the most probable factors driving the continuation effects observed in the first part of the research, with nonsynchronous trading and investor loss aversion highlighted as potential causes of very short-term and medium-term effects respectively.
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Ozkan, Bora. "Six Sigma, Firm Performance and Returns Predictability In Emerging Real Estate Market." ScholarWorks@UNO, 2013. http://scholarworks.uno.edu/td/1756.
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This dissertation consists of two essays. First essay investigates Fortune 500 companies that implemented Six Sigma. Since the 1980s, industrial organizations have adopted practices such as Six Sigma to maintain and enhance competitiveness. The purpose of this study is to look at the long run stock price and the operating performance of Fortune 500 companies that were identified to have implemented Six Sigma compared to the overall market performance as well as the performance of industry and size matched firms. Even though our sample firms improved several variables after implementing Six Sigma, their operating performances were not quite close to the performances of the matching firms. After implementing Six Sigma, compared to the industry and size matched firms, the only variable that improved out of 14 variables we looked at, is the growth in staff levels. The findings may contribute to understanding the reasons that underlie the so-called jobless recovery.
Second essay investigates the real estate price indices in 19 emerging markets. The main objectives of the central banks are not necessarily in line with the goals for asset prices, particularly house prices; however house price changes can have important implications for economic activity and inflation. The consequences of excess changes in house prices also should be watched carefully by central banks and other government agencies that regulate financial institutions for the purpose of financial stability. This essay searches for a link between house prices, broad money, private credit and the macro-economy among 19 emerging markets. We are also trying to explain which variables predict the emerging markets real estate index returns. Our results show that money market rate, growth in GDP and CPI as well as log of private credit and money supply have significant predictive power on growth in real estate price indices a quarter ahead. We also show that there is multidirectional causality among all of the variables. A unique data is being used for the emerging markets real estate price indexes in this study. The data is provided by aDubaibased private company which offers emerging markets real estate information to its customers.
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Scheurle, Patrick. "Predictability of the Swiss stock market with respect to style." Wiesbaden Gabler, 2010. http://d-nb.info/998909203/04.
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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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Yang, Siyi. "A Study of Swedish Mortgage Interest Rates and Swedbank Stock Returns : Time-varying Mortgage Margins and Stock Returns." Thesis, KTH, Bank och finans, 2012. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-109825.
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How banks set the mortgage interest rates and the sizes of the mortgage margins they obtain from making mortgage loans always attract attention from households, government authorities, politicians and market actors. This thesis studies the relationship between Swedish mortgage interest rates and mortgage lending institutions’ costs of obtaining funds, and how the gross margins of mortgage interest rates influence the banks stock returns. In general, banks’ mortgage margins are correlated with their funding costs, which are typically reflected in the yields of mortgage bonds (covered bonds), interbank rates (STIBOR) and the repo rate. How-ever the correlations change over time and sometimes the mortgage margins are relatively low and sometimes relatively high. Since mortgage loans play an important role in banks’ lending business, the related interest rate margins should influence banks’ profitability and therefore the performance of their stock. Everything else equal, higher margins should result in higher stock returns. I have collected and constructed a time-series data set based on Swedbank mortgage rates, Swedbank stock prices, yields on government bonds, yields on mortgage bonds, STIBOR interest rates, and repo rate. Both descriptive analysis and econometric models are applied to analyze the time-varying characteristics of the financial data. The thesis covers unconditional correlation (Pearson correlations), and conditional correlation through applying DCC-GARCH models. Besides, ARCH and GARCH models are employed to measure the ARCH and GARCH effects of the spread (premium) terms between interest rates. The results from descriptive analysis and econometric models present the tight relationships between the mortgage interest rates and the corresponding funding costs, and show the posi-tive but low correlations between mortgage margins and bank’s stock returns. The results also support the existence of time-vary volatilities (risk) of spread (premium) terms and quantify the growth of return for the certain increase in risk taking.
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Celiker, Umut. "Cross Sectional Determinants Of Turkish Stock Market Returns." Thesis, METU, 2004. http://etd.lib.metu.edu.tr/upload/12605243/index.pdf.
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This thesis analyzes the relationship between stock returns and firm-specific characteristics including market beta, size, book-to-market ratio, leverage, earnings yield, net sales-to-price ratio and prior return performance in Istanbul Stock Exchange during the period 1993-2003. Moreover, the predictability of some macroeconomic variables based on the stock market return behavior is investigated.
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Schmidt, Martin Hermann. "Four essays on German stocks." Doctoral thesis, Humboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät, 2016. http://dx.doi.org/10.18452/17445.
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Diese Dissertation zielt darauf ab, ein besseres Verständnis für Anomalien und Insiderhandel zu schaffen, sowie die Verfügbarkeit von qualitativ hochwertigen Daten für den deutschen Aktienmarkt zu verbessern. Der erste Aufsatz beinhaltet eine verzerrungsfreie Zeitreihe von monatlichen Renditen deutscher Aktien für die Jahre 1954 bis 2013, die auf der Basis stabiler Regeln berechnet und gut dokumentiert ist. Im Weiteren enthält der Aufsatz eine detaillierte Beschreibung des deutschen Aktienmarktes und dessen Besonderheiten, insbesondere im Vergleich zu den USA. Der zweite Aufsatz zeigt am Beispiel des Fama/French Drei-Faktoren-Modells die Probleme auf, die Anbieter und Nutzer von Faktorendaten haben, die sich nicht auf die USA beziehen. Die empirische Analyse von sieben Faktorensets für Deutschland zeigt, dass die Übernahme von Faktormodellen in einen anderen Kapitalmarkt eine komplexe Thematik ist. Der Aufsatz gibt Anregungen für Nutzer und Anbieter von Faktorensets und zeigt, wie die Wahl des Faktorensets das Ergebnis einer Studie beeinflussen kann. Im dritten Aufsatz werden verschiedene zyklische und antizyklische Handelsstrategien hinsichtlich ihrer Performance im deutschen Aktienmarkt untersucht. Von den untersuchten Strategien erscheint nur Momentum konsequent abnormale Renditen zu erzielen, dies auch nach Transaktionskosten. Die vierte Arbeit untersucht öffentlich bekannt gegebene Aktientransaktionen von Insidern börsennotierter deutscher Unternehmen. Der Aufsatz zeigt, dass Insider von TecDAX-Unternehmen und ihre Imitatoren hohe und statistisch signifikante abnormale Renditen erzielen. Insgesamt zeigt die Dissertation, dass methodische Variationen, die Verwendung verschiedener Untersuchungsdesigns, die Datenqualität und die Sorgfalt beim Erstellen von empirischen Analysen zur Beurteilung der Robustheit und der Stabilität der Ergebnisse unerlässlich sind. Der deutsche Aktienmarkt scheint effizienter zu sein als bisherigere Studien typischerweise nahelegen.This doctoral thesis aims to contribute to a better understanding of stock market anomalies and insider trading as well as to improve the availability of high quality data for the German stock market. The first paper provides a sixty-year time series of monthly returns on German stocks that is constructed on the basis of stable rules, is well documented, includes all return components, and is free of biases. The paper also contains a detailed description of the German stock market, its peculiarities, regulation and differences as compared to the U.S. The second paper uses the Fama/French three-factor model as an example to point out the problems that providers and users of non-U.S factor data sets face. The empirical analysis of seven different factor data sets available for Germany shows that exporting a specific factor model from the U.S. to another capital market is neither an easy nor well-defined task. The paper gives suggestions to users and creators of factor sets and shows how the choice of a factor set affects the result of an empirical study. The third paper provides evidence on how various contrarian, momentum and seasonality strategies perform in the German stock market. Among these strategies, only momentum investing appears to earn persistently non-zero returns, even after transaction costs. The fourth paper studies publicly disclosed stock transactions by insiders of listed German firms. The paper finds that insiders of TecDAX firms earn large and statistically significant abnormal returns net of transaction costs; for DAX insiders they are indistinguishable from zero. Overall, this thesis illustrates that methodological variations, the use of different specifications, data quality and care when preparing empirical analyses is essential in the assessment of the robustness and stability of results. In sum, the German stock market appears to be more efficient than previous studies have typically suggested.
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Choi, Chun-sun. "Modelling the fat tail distribution of security market returns." Click to view the E-thesis via HKUTO, 1989. http://sunzi.lib.hku.hk/hkuto/record/B3197577X.
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Rodríguez, Gabriel, and Alfredo Vargas. "Impact of Political Expectations on Lima Stock Market Returns." Economía, 2012. http://repositorio.pucp.edu.pe/index/handle/123456789/116823.
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This paper analyzes the impact of political expectations on the returns of Peru’s stock market using information pertaining to the the electoral periods of 1995 and 2000. The main variable is a measure of the probability that a candidate will win the elections. Therefore, the hypothesis to be proven is whether the uncertainty of the election results affects Peru’s stock market returns. We use other alternative variables such as the exchange rate, inflation, and terms of trade. The results show that for the first period of the analysis (1995), the probability that the candidate Fujimori would win the elections positively affected stock market returns. On the other hand, for the period of 2000, the above-mentioned variable changed, implying a loss of electoral appeal on thepart of the candidate Fujimori. Furthermore, the evidence of corruption uncovered at the time contributed to an explanation of the result’s importance. The results also show the importance ofother macroeconomic variables in the estimations.El presente documento analiza el impacto de las expectativas políticas (medida como la probabilidad de que un candidato gane las elecciones) sobre los retornos del índice general de la Bolsa de Valores de Lima (IGBVL) utilizando información para los períodos electorales de 1995 y 2000. La hipótesis a verificar es si el grado de incertidumbre sobre el resultado de las elecciones presidenciales afecta los retornos del IGBVL. Se usan otras variables explicativas como el tipo de cambio, la inflación, y los términos de intercambio. Los resultados muestran que para el primer período de análisis (1995) la probabilidad de que el candidato Fujimori gane las elecciones tuvo un signo positivo sobre el rendimiento del IGBVL mientras que para el período 2000, el signo de dicha variable cambia, siendo en ambos casos estadísticamente significativos.
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An, Byeongung. "International stock market linkages : are overnight returns on the U.S. Market informative?" Thesis, Queensland University of Technology, 2012. https://eprints.qut.edu.au/60251/1/Byeongung_An_Thesis.pdf.
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Based on the theory of international stock market co-movements, this study shows that a profitable trading strategy can be developed. The U.S. market return is considered as overnight information by ordinary investors in the Asian and the European stock markets, and opening prices in local markets reflect the U.S. overnight return. However, smart traders would either judge the impact of overnight information more correctly, or predict unreleased information. Thus, the difference between expected opening prices based on the U.S. return and actual opening prices is counted as smart traders’ prediction power, which is either a buy or a sell signal.
Using index futures price data from 12 countries from 2000 to 2011, cumulative returns on the trading strategy are calculated with taking into account transaction costs.
The empirical results show that the proposed trading strategy generates higher riskadjusted returns than that of the benchmarks in 12 sample countries. The trading performances for the Asian markets surpass those for the European markets because the U.S. return is the only overnight information for the Asian markets whereas the Asian markets returns are additional information to the European investors.
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Kunze, Karl-Kuno, and Hans Gerhard Strohe. "Antipersistence in German stock returns." Universität Potsdam, 2010. http://opus.kobv.de/ubp/volltexte/2010/4558/.
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Persistence of stock returns is an extensively studied and discussed theme in the analysis of financial markets. Antipersistence is usually attributed to volatilities. However, not only volatilities but also stock returns can exhibit antipersistence. Antipersistent noise has a somewhat rougher appearance than Gaussian noise. Heuristically spoken, price movements are more likely followed by movements in the opposite direction than in the same direction.
The pertaining integrated process exhibits a smaller range – prices seem to stay in the vicinity of the initial value. We apply a widely used test based upon the modified R/S-Method by Lo [1991] to daily returns of 21 German stocks from 1960 to 2008. Combining this test with the concept of moving windows by Carbone et al. [2004], we are able to determine periods of antipersistence for some of the series under examination. Our results suggest that antipersistence can be found for stocks and periods where extraordinary corporate actions such as mergers & acquisitions or financial distress are present. These effects should be properly accounted for when choosing and designing models for inference.
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Almeida, João Pedro da Silva. "Predictability of stock market returns: evidence from Eurozone's banking sectors." Master's thesis, 2014. http://hdl.handle.net/10362/15071.
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This paper analyzes the in-, and out-of sample, predictability of the stock market returns from Eurozone’s banking sectors, arising from bank-specific ratios and macroeconomic variables, using panel estimation techniques. In order to do that, I set an unbalanced panel of 116 banks returns, from April, 1991, to March, 2013, to constitute equal-weighted country-sorted portfolios representative of the Austrian, Belgian, Finish, French, German, Greek, Irish, Italian, Portuguese and Spanish banking sectors. I find that both earnings per share (EPS) and the ratio of total loans to total assets have in-sample predictive power over the portfolios’ monthly returns whereas, regarding the cross-section of annual returns, only EPS retain significant explanatory power. Nevertheless, the sign associated with the impact of EPS is contrarian to the results of past literature. When looking at inter-yearly horizon returns, I document in-sample predictive power arising from the ratios of provisions to net interest income, and non-interest income to net income. Regarding the out-of-sample performance of the proposed models, I find that these would only beat the portfolios’ historical mean on the month following the disclosure of year-end financial statements. Still, the evidence found is not statistically significant. Finally, in a last attempt to find significant evidence of predictability of monthly and annual returns, I use Fama and French 3-Factor and Carhart models to describe the cross-section of returns. Although in-sample the factors can significantly track Eurozone’s banking sectors’ stock market returns, they do not beat the portfolios’ historical mean when forecasting returns.NSBE - UNL
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Farroukh, Abed El Karim. "Business Cycles and Stock Market Returns Predictability Evidence from Continental Europe." Master's thesis, 2016. https://repositorio-aberto.up.pt/handle/10216/83704.
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Farroukh, Abed El Karim. "Business Cycles and Stock Market Returns Predictability Evidence from Continental Europe." Dissertação, 2016. https://repositorio-aberto.up.pt/handle/10216/83704.
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Chu, Chin-Kerl, and 徐金軻. "Style Investing and Return Predictability within Taiwan Stock Market." Thesis, 2014. http://ndltd.ncl.edu.tw/handle/wjz362.
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碩士國立中正大學
財務金融研究所
103
In this paper, we analyze the forecasting ability of three dimension style past return in Taiwan stock market. With Fama-Macbeth (1973) cross-sectional regression, we found the significantly predictability of style past return to the individual stocks include in the specific style. However, our finding is different with Wahal and Yavuz (2013). We didn’t found the momentum effect from style past return but contrarian. We also use the Henriksson and Merton (1981) and Cumbey and Modest (1981) market timing test to identify the market timing ability of style investing strategies. Overall, we found the predictability of style past returns and market timing ability from style investing strategy.
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Kew, Si Roei. "Studies on return predictability in the Malaysian stock market." Thesis, 2015. http://hdl.handle.net/1959.13/1310370.
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Research Doctorate - Doctor of Philosophy (PhD)This thesis comprises three empirical studies that examine stock return predictability in Malaysia. The first study examines whether future returns can be predicted using past returns and market-wide information. This study provides new evidence using the bootstrap automatic variance ratio test and the price delay measure in the Malaysian context. The findings reveal that stock prices deviate from a random walk and tend to respond slowly to market-wide information over the complete sample period. The findings also demonstrate that informational efficiency increases with firm size and trading frequency. This study also examines time variation in informational efficiency using overlapping and non-overlapping subsample windows. It is observed that serial dependence in stock returns and price delays are time-varying. Further, consistent with Lo’s (2004) adaptive market hypothesis, market efficiency is shown to be dependent on market conditions. The second study investigates the profitability of contrarian and momentum strategies for short-, intermediate- and long-term investment horizons. No prior studies have comprehensively investigated whether contrarian and momentum profits can be related to factors such as firm size, monthly seasonality, market states, lead–lag effects and market overreaction in the context of the Malaysian stock market. The findings reveal that momentum strategies do not generate profits in Malaysia. Rather, contrarian strategies realise significant returns over short, intermediate and long investment horizons. Contrarian profits are most pronounced among medium and small stocks, and they are greater following market downturns. Moreover, the previously documented Chinese New Year effect is evident in contrarian profits. Further, the lead–lag effect identified by Lo and MacKinlay (1990) explains the profitability of contrarian strategies. Contrarian returns also diminish after accounting for the Fama–French factors. With the exception of a 48-month strategy, all strategies yield negative risk-adjusted returns after incorporating transaction costs. The final study is a novel attempt to examine the existence of post-earnings announcement drift (PEAD) and its determinants in the Malaysian stock market. This study examines whether the PEAD anomaly is attributable to market risk, arbitrage risk, liquidity, transaction costs, size, book-to-market ratios and investor sophistication. The findings reveal that an earnings surprise has strong predictive power with respect to PEAD. Further, the results show a significant negative effect of turnover on PEAD, suggesting that liquidity encourages arbitrage activities and enhances the extent to which earnings information is efficiently priced. The results are robust to using three different sample periods and alternative measures of liquidity and arbitrage risks. The findings are also robust to constructing standardised unexpected earnings portfolios based on the ex-ante quintile breakpoints and using a sample of stocks that trade every day of the 60-day event window following the announcement date. Moreover, a strategy based on PEAD yields a three-month post-announcement return of approximately 3.35 per cent. However, estimated transaction costs eliminate all profits generated from strategies based on PEAD. This thesis contributes to market efficiency research by providing an in-depth analysis of return predictability in the Malaysian stock market. The findings of the thesis provide new insights into the degree of stock return predictability in Malaysia. In particular, the results have significant implications for market participants to identify mispricing and execute past returns-based and earnings-based investment strategies. It also aids regulators in identifying episodes of mispricing in the Malaysian stock market.
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Elvanlioglu, Can. "Economic evolution of Turkish stock market: a regime switching approach." Master's thesis, 2021. http://hdl.handle.net/10362/122670.
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This work project compares simple linear predictive regressions and regime switching predictive regression, to analyse time varying predictability of the stock returns in XU100 index. The approach is to compare regression statistics in-sample and to compare error statistics and predictive graphs out-of-sample. Findings reveal that employing predictive regime switching models reflect arbitrage opportunities better than predictive linear models in-sample. Out-of-sample analysis, however, provide no evidence for high predictive power for either predictive linear models or regime switching models.
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Gomes, Tomás Francisco Antão. "Predictability of stock market returns and it is importance in Asset Allocation in the US." Master's thesis, 2021. http://hdl.handle.net/10400.14/35554.
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This thesis tests the predictive power of the stock market. It suggests new ways on how to improve it is predictive ability. Four main methods were used: combining individual predictors, assigning different weights to the best individual forecasts, modelling predictive ability and explanatory power. I show that combining the individual forecasts into dynamic models yields better results when compared with the models in Rapach et al. (2013). I find that the best model was highly dependent on the frequency and the geographical location. Lastly, the economic significance of using predictive regressions in Asset Allocation was also tested. I conclude that statistical improvements more often than not result in artificial enhancements of the predictive power, which do not translate into practical economic gains.Esta tese testa a previsibilidade do mercado americano. A análise mostrou que o poder preditivo das variáveis era altamente dependente do tamanho da janela de previsão. Quatro métodos principais foram usados: combinar as variáveis individuais, atribuir diferentes pesos às melhores previsões individuais, modelar a capacidade de previsão das variáveis e modelar o poder explicativo das variáveis. Eu mostro que a combinação das previsões individuais usando modelos dinâmicos produz melhores resultados quando comparado com os modelos sugeridos por Rapach et al. (2013). Também fica claro que a melhor variável é altamente dependente da frequência e da localização geográfica. Foi também testada a significância económica do uso de regressões preditivas na criação de modelos de retornos do mercado de ações por meio de alocação de ativos. Eu concluo que melhorias estatísticas frequentemente resultam em melhorias artificiais que não se traduzem em ganhos económicos.
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De-RongKong and 孔德蓉. "Predictability of short interest ratio of stock return – Evidence from Taiwan Stock Market." Thesis, 2017. http://ndltd.ncl.edu.tw/handle/nhwp39.
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碩士國立成功大學
財務金融研究所
105
This paper studies the relationship between short interest ratio and subsequent stock return in Taiwan stock market. I find that short interest ratio is negatively related to subsequent stock returns, and the result is statistically and economically significant. More importantly, the effects are long-lasting. This evidence suggests that short sellers in Taiwan tend to be informed. In addition, short interest ratio has stronger predictability when short sale constraints are loosened considerably. Moreover, stocks with high short interest ratio have weak fundamentals and high turnover, implying that short sellers detect not only intrinsic value but also market's sentiment for stocks.
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Wang, Wen-Ting, and 王玟婷. "The Predictability of Futures and Options Trading on Stock Market Return." Thesis, 2012. http://ndltd.ncl.edu.tw/handle/99074267848363240264.
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碩士淡江大學
財務金融學系碩士班
100
n this paper, we apply the method of Chang, Hsieh and Wang (2010) to investigate the information content of Delta to examine the market timing and the predictive power of different types of traders in the TAIEX futures and options markets on stock market return. We also discuss the impact of financial crisis how to affect the traders. After the market timing and regression analysis about predictability, this paper finds that foreign institutional investors who trade in only futures market and in both futures and options markets (FF and CF) are the informed traders on the stock market return. Dealers (CS) have wrong information about future return in our result. Market makers’ (OM) major purpose is providing liquidity, so their predictability is not significant. Besides, we also find that individual investors have no the predictive power of the future return. For this reason, we define individual investors as noise traders. In the period of financial crisis, most of investors had been influenced, including domestic institutional investors, small individual investors and market makers. And we find foreign investors could not be impacted in this period. Our empirical results show that foreign institutional investors who trade in only futures market and in both futures and options markets (FF and CF) possess the strongest and most direct information.
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Silva, Nuno Rodam. "Forecasting stock returns out-of-sample: how deeply can we trust our predictors?" Master's thesis, 2013. http://hdl.handle.net/10071/7379.
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The growing acceptance about the stock returns’ predictability, triggered the desire of discovering variables amongst financial, economic or macroeconomic indicators that presented some kind of statistical significance as predictors.
However, when Goyal & Welch (2008) presented a study where they inferred about the predictive capacity of a long list of commonly used predictors, it had a great impact on the finance community. Using all the information available to a representative investor at each moment of the sample to forecast the next period’s return (i.e. the out-of-sample approach), they conclude that a simple historical mean of the past returns would perform better than the models proposed by the literature. Those models would not have been of any help to an investor to profitably time the market. Up to this day, these findings created a major challenge in finance: Which models are capable of beating the historical mean, after all?
This dissertation rebuilds the Goyal & Welch (2008) analysis, explaining how a model might become statistically significant and how an investor should analyze the predictors, apart from their level of statistical significance, before using them to time its investment decisions. After all, how deeply can we trust our predictors?
It was concluded that, when there is statistical evidence of predictability from a model, it is not usually because of a consistent relationship between the variables, but because of performance peaks during abnormal stock return periods, resultant from financial and economic crises, instead.O crescente consenso sobre a possibilidade de prever retornos bolsistas levou à busca e estabelecimento de indicadores de áreas financeiras, corporativas ou macroeconómicas que gerassem algum tipo de evidência estatística em preditores. No entanto, o entusiasmo deu lugar à apreensão quando Goyal e Welch (2008) apresentaram os resultados de um estudo, onde testavam uma lista de indicadores comummente utilizados na previsão de retornos. Utilizando toda a informação disponível aos investidores a cada momento da amostra para calcular o retorno previsto para o período seguinte, foi concluído que a utilização de uma simples média dos retornos passados tinha um melhor resultado que os modelos tradicionalmente apregoados pela literatura. Os investidores não teriam, portanto, lucrado com a utilização de tais modelos. Até hoje este estudo gerou um desafio na comunidade financeira: Que modelos são, afinal, capazes de suplantar uma simples média aritmética? Esta dissertação refaz a análise de Goyal e Welch (2008), explicando quais as razões que levam modelos econométricos a estabelecerem relações significativas de previsão de retornos e como deve um investidor analisar a consistência dessas relações, antes de as aplicar à sua tomada de decisões de investimento. Afinal, até que ponto podemos confiar nos nossos modelos? Foi concluído que a evidência estatística, nos raros casos em que a há, é obtida não de uma forma consistente, desejável, mas sim graças à capacidade pontual que estes modelos demonstram em crises económicas e financeiras extraordinárias, onde se vivem períodos de retornos anormais.
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Bahrami, Afsaneh. "Return predictability of emerging stock markets using combination forecast and regime switching models." Thesis, 2017. http://hdl.handle.net/1959.13/1336114.
Full textAbstract:
Research Doctorate - Doctor of Philosophy (PhD)This study provides a comprehensive examination of stock return predictability in advanced emerging markets. These markets offer unique investment opportunities to international investors as they are weakly integrated with developed markets and generally yield robust returns as a result of financial rapid economic growth. However, emerging markets typically underperform developed markets in terms of transparency in financial reporting, investor protection provisions and extent of financial liberalisation. Since all of these factors are inversely related to stock return predictability, emerging markets may exhibit a higher degree of return predictability than their developed counterparts. The extant literature is over-represented by studies of return predictability in the context of developed markets, and more importantly, most studies provide return forecasts from an individual predictive model with time-invariant parameters. This study provides comprehensive evidence of return predictability for ten advanced emerging markets (Brazil, Czech Republic, Hungary, Malaysia, Mexico, Poland, South Africa, Taiwan, Thailand and Turkey) and overcomes methodological shortcomings of previous studies in this area. More specifically, return predictability is examined in this study using three sets of predictor variables: financial, macroeconomic and technical. These variables are theoretically motivated and applied across each of the ten advanced emerging markets to ensure consistency of the results. The predictor variables are used in models with a single predictor variable (univariate predictive model), and models with all relevant predictor variables (kitchen-sink regression model). Models with time-invariant parameters suggest that financial variables provide the best in-sample return predictability, while macroeconomic variables provide the best out-of-sample return predictability. Overall, the results are consistent with the previous findings in developed markets that none of the univariate predictive models are able to consistently outperform a historical average benchmark. This study then applies more recent methodologies that reduce forecast error variance (combination forecast method), allow model parameters to vary over time (Markov regime-switching models) and integrate the combination forecast method with a Markov regime- switching model. To the best of our knowledge these methodologies have not been used to test the predictability of returns in advanced emerging markets. The results provide consistent evidence of in-sample stock return predictability particularly when using Markov regime- switching models. Evidence of out-of-sample stock return predictability is also found when applying a combination forecast or a Markov regime-switching model. However, the strongest evidence of out-of-sample return predictability is found by combining forecasts from the individual regime-switching forecast returns. These findings are important for fund managers and investors attempting to improve investment performance through higher expected returns and risk diversification opportunities offered by emerging markets. This study shows that a risk-averse investor can attain utility gains by using forecast returns from the combination forecast and regime-switching models. Further, evidence of stock return predictability is important for researchers to develop more realistic asset pricing models for emerging markets.
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FANG, ZAN-CI, and 方讚麒. "The TAIEX Return Predictability of Option Order Imbalance in After-hours Stock Market Trading." Thesis, 2017. http://ndltd.ncl.edu.tw/handle/dpgbt8.
Full textAbstract:
碩士東海大學
財務金融學系
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The predictability of the information content contained in option trading usually interests investors, especially the information content of option trading during the periods prior to the open and after the close of the stock market. By following Hu’s (2014) method, this research investigates whether the order imbalance of TAIEX options traded during the pre-open session and after-close session of the stock market possesses predictive power on subsequent TAIEX returns. According to the empirical results, both the order imbalances of options traded during the pre-open session and after-close session of the stock market positively predict the future TAIEX return. Particularly, the marginal influence of option order imbalance on TAIEX returns during the pre-open session are bigger than after-close session. We also explore the predictability of order imbalances constructed by options with varying moneyness and time-to-maturity. The empirical evidence supports that informed traders in the TAIEX option market prefer to exploit their private information by trading high-leverage options during the pre-open session of the stock market.
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Gomes, Ana Sofia Moreira. "Can we anticipate the stock market using the put-call parity? : a study on return predictability." Master's thesis, 2019. http://hdl.handle.net/10400.14/29311.
Full textAbstract:
Using the deviations from the put-call parity, we investigate the existence of relevant information about the future stock price not yet incorporated in the stock market. In order to capture the extent of the mispricing between pairs of calls and puts’ options, we calculate daily volatility spreads as the weighted average of the difference between implied volatilities. We use the option signals provided by our measure to create stock portfolios, assessing the informational flow between the two markets. We find a strong evidence that relatively expensive calls in respect to puts carry more information about future stock returns than the opposite: the hedge portfolio earns a four-week abnormal return of 31.6 bps. We further extend our research to study the effect of liquidity and informed trading. Our results suggest that the most liquid options are the ones conveying more information about future stock returns. Furthermore, informed trading is only relevant when its probability in the stock market assumes high values. Finally, we show an increase of returns’ predictability in the post-financial crisis period, which contradicts the argument present in literature that this flow would tend to disappear due to the learning process of the market participants. Overall, we provide evidence on return predictability by the incorporation in the stock market of information intrinsic to the deviations from put-call parity.Através dos desvios da paridade entre opções de compra e de venda, investigamos a existência de informação relevante sobre o preço futuro das ações, não incorporada no mercado de ações. De forma a quantificar o mispricing entre os dois tipos de opção, calculamos spreads de volatilidade definidos como a média ponderada da diferença entre as volatilidades implícitas pela opção de compra e de venda. Os diferentes níveis de indicadores revelados definem a criação de cada portfolio de ações, o que nos permitirá avaliar o fluxo de informação entre os dois mercados. Os resultados mostram que as opções de compra, sobrevalorizadas face às de venda, compreendem mais informação sobre os retornos futuros do mercado de ações do que o inverso: o hedge portfolio obtém um retorno anormal de 31.6 pp, após quatro semanas da sua formação. Numa extensão da análise, estudamos o efeito da liquidez e da existência de trading informado no mercado de ações. Os resultados sugerem que as opções mais líquidas são as que transmitem mais informação futura. Por outro lado, a existência de trading informado apenas se torna relevante quando a sua probabilidade assume valores elevados. Por último, verificamos um aumento na previsibilidade dos retornos no período após a crise financeira, o que não revela a aprendizagem dos participantes como referido na literatura. No geral, encontramos evidência da previsibilidade dos retornos através da incorporação, no mercado de ações, de informação intrínseca aos desvios da paridade entre opções de compra e de venda.