The Expected Value Premium
Total Page:16
File Type:pdf, Size:1020Kb
Load more
Recommended publications
-
Using Equity Market Reactions to Infer Exposure to Trade Liberalization
Using Equity Market Reactions to Infer Exposure to Trade Liberalization Andrew Greenland∗ Mihai Iony John Loprestiz Peter K. Schott§ First Draft: June 2018 This Draft: June 2019{ Abstract We develop a method for identifying firm exposure to changes in policy using ab- normal equity returns, and employ it to study US trade liberalization with China. Abnormal returns surrounding the liberalization’s passage into law vary substantially even within industries, are correlated with but have explanatory power beyond tradi- tional measures of import competition, and predict sharper relative changes in operating profit, employment and capital than abnormal returns during randomly chosen days. Predicted relative increases in operating profit among the very largest firms swamp the losses of smaller firms, providing further insight into this liberalization’s distributional implications. ∗Martha and Spencer Love School of Business, Elon University; [email protected] yEller College of Management, University of Arizona; [email protected] zThe College of William & Mary; [email protected] §Yale School of Management & NBER; [email protected] {We thank Kerem Cosar, Teresa Fort, Justin Pierce and seminar participants at CUHK, Elon University, the Fed Board, Hitotsubashi, LSE, the Mid-Atlantic Trade Workshop, UNC Chapel Hill, the University of Toronto and the University of Tokyo for helpful comments and feedback. 1 Introduction We propose a method for measuring firm exposure to changes in policy. Our approach is based on financial markets’ reactions to key events associated with the new regime, e.g., the legislative votes during which it becomes law, and assumes that all new information relevant for firm value is fully reflected in its stock price. -
Y La Política Económica)
Valeriano F con suesposaysuscuatrohijos. Desde 1987resideenWashington (Buenos Aires,1988) "El ABC(ylaZ)deeconomía" Alvaro Saieh,(BuenosAires,1984),yel precios ypolíticamonetaria"con mas destacadossecuentan"Dinero, reformas bancarias.Entresuslibros estabilidad macroeconómicay cambiarios, mercadosdecapitales, publicaciones relativosaregímenes Es autordenumerososensayosy económicas. crisis bancariasypolíticasmacro- pitales yenlasinterrelacionesentre de desarrollomercadosca- en elCEMLA.Esexpertoproblemas en universidadesdeArgentina,Chiley profesor deeconomíaeinvestigador obtuvo sudoctoradoen1973.Fue Universidad deChicago,donde Realizó estudiosdepostgradoenla en elBancoMundial. actualmente comoDirectorEjecutivo [email protected] Valeriano F Correo electrónico: . Garcíasedesempeña . García CEMLA PARA ENTENDER LA ECONOMÍA POLÍTICA (Y LA POLÍTICA ECONÓMICA) Valeriano F. García ECONÓMICA) (Y LAPOLÍTICA POLÍTICA LA ECONOMÍA P TEXTOS BÁSICOS V aleriano F ARA ENTENDER . García Valeriano F. García PARA ENTENDER LA ECONOMÍA POLÍTICA (Y LA POLÍTICA ECONÓMICA) CENTRO DE ESTUDIOS MONETARIOS LATINOAMERICANOS México, D. F. 2000 Primera edición, 2000 © Centro de Estudios Monetarios Latinoamericanos, 2000 Derechos reservados conforme a la ley ISBN 968-6154-66-3 Impreso y hecho en México Printed and made in Mexico A mi esposa Estela, y a nuestros hijos Álvaro, Sebastián, Valeriano y Bárbara Para entender la economía política… PRÓLOGO Este libro es una introducción a los principios y conceptos básicos de la economía política. He querido hacer un libro que, sin dejar de lado un rigor mínimo, sea a la vez intere- sante y formativo. La idea detrás de estas páginas es explicar conceptos en forma simple pero estricta. Ello para que, ya sea como profesional o ciudadano, el lector sepa cómo y por qué le pueden afectar, a él o a su país, nuevas leyes de sala- rio mínimo, un nuevo régimen cambiario o leyes para prote- ger a la mujer en el mercado de trabajo, etcétera. -
The Fama-French Factors As Proxies for Fundamental Economic Risks
The Fama-French factors as proxies for fundamental economic risks Maria Vassalou Working Paper No. 181 Working Paper Series Center on Japanese Economy and Business Columbia Business School November 2000 The Fama-French factors as proxies for fundamental economic risks Maria Vassalou* Columbia University and CEPR First Draft: October 1999 This Draft: June 2000 * Graduate School of Business, Columbia University, 3022 Broadway, 416 Uris Hall, New York, NY 10027, tel: 212-854 4104, e-mail: [email protected]. Financial support from the Center for Japanese Economy and Business at Columbia Business School is gratefully acknowledged. 1 The Fama-French factors as proxies for Fundamental Economic Risks Abstract This paper provides an economic interpretation for the book-to-market (HML) and size (SMB) factors in the Fama-French model using data from ten developed countries. We show that part of the information in these factors that is priced in equity returns, refers to news about future GDP growth. However, a model that includes only the market factor and news about future GDP growth cannot explain asset returns as well as the Fama-French model does. Our tests reveal that HML and SMB also contain important information about the current default premium. A model that includes the information in HML and SMB about the default premium and news about future GDP growth, together with the market factor, can successfully replicate the performance of the Fama-French model in the US. Our results suggest that HML and SMB summarize information about two state variables: the current default premium and news about future GDP growth. -
The Past, Present, and Future of Economics: a Celebration of the 125-Year Anniversary of the JPE and of Chicago Economics
The Past, Present, and Future of Economics: A Celebration of the 125-Year Anniversary of the JPE and of Chicago Economics Introduction John List Chairperson, Department of Economics Harald Uhlig Head Editor, Journal of Political Economy The Journal of Political Economy is celebrating its 125th anniversary this year. For that occasion, we decided to do something special for the JPE and for Chicago economics. We invited our senior colleagues at the de- partment and several at Booth to contribute to this collection of essays. We asked them to contribute around 5 pages of final printed pages plus ref- erences, providing their own and possibly unique perspective on the var- ious fields that we cover. There was not much in terms of instructions. On purpose, this special section is intended as a kaleidoscope, as a colorful assembly of views and perspectives, with the authors each bringing their own perspective and personality to bear. Each was given a topic according to his or her spe- cialty as a starting point, though quite a few chose to deviate from that, and that was welcome. Some chose to collaborate, whereas others did not. While not intended to be as encompassing as, say, a handbook chapter, we asked our colleagues that it would be good to point to a few key papers published in the JPE as a way of celebrating the influence of this journal in their field. It was suggested that we assemble the 200 most-cited papers published in the JPE as a guide and divvy them up across the contribu- tors, and so we did (with all the appropriate caveats). -
CURRICULUM VITAE August, 2015
CURRICULUM VITAE August, 2015 Robert James Shiller Current Position Sterling Professor of Economics Yale University Cowles Foundation for Research in Economics P.O. Box 208281 New Haven, Connecticut 06520-8281 Delivery Address Cowles Foundation for Research in Economics 30 Hillhouse Avenue, Room 11a New Haven, CT 06520 Home Address 201 Everit Street New Haven, CT 06511 Telephone 203-432-3708 Office 203-432-6167 Fax 203-787-2182 Home [email protected] E-mail http://www.econ.yale.edu/~shiller Home Page Date of Birth March 29, 1946, Detroit, Michigan Marital Status Married, two grown children Education 1967 B.A. University of Michigan 1968 S.M. Massachusetts Institute of Technology 1972 Ph.D. Massachusetts Institute of Technology Employment Sterling Professor of Economics, Yale University, 2013- Arthur M. Okun Professor of Economics, Yale University 2008-13 Stanley B. Resor Professor of Economics Yale University 1989-2008 Professor of Economics, Yale University, 1982-, with joint appointment with Yale School of Management 2006-, Professor Adjunct of Law in semesters starting 2006 Visiting Professor, Department of Economics, Massachusetts Institute of Technology, 1981-82. Professor of Economics, University of Pennsylvania, and Professor of Finance, The Wharton School, 1981-82. Visitor, National Bureau of Economic Research, Cambridge, Massachusetts, and Visiting Scholar, Department of Economics, Harvard University, 1980-81. Associate Professor, Department of Economics, University of Pennsylvania, 1974-81. 1 Research Fellow, National Bureau of Economic Research, Research Center for Economics and Management Science, Cambridge; and Visiting Scholar, Department of Economics, Massachusetts Institute of Technology, 1974-75. Assistant Professor, Department of Economics, University of Minnesota, 1972-74. -
Economic Fundamentals, Risk, and Momentum Profits
Economic Fundamentals, Risk, and Momentum Profits Laura X.L. Liu,JeroldB.Warner∗ ,† and Lu Zhang‡ February 2004§ Abstract We study empirically the changes in economic fundamentals for firms with recent stock price momentum. We find that: (i) winners have temporarily higher dividend, investment, and sales growth rates, and losers have temporarily lower dividend, investment, and sales growth rates; (ii) the duration of the growth rate dispersion matches approximately that of the momentum profits; (iii) past returns are strong, positive predictors of future growth rates; and (iv) factor-mimicking portfolios on expected growth rates earn significantly positive returns on average. This evidence is consistent with the theoretical predictions of Johnson (2002), in which momentum returns reflect compensation for temporary shifts in risk associated with expected growth. Additional tests do not provide much support for a risk-based explanation, however. ∗Doctoral Student in Finance, William E. Simon Graduate School of Business Administration, University of Rochester; Tel: (585)275-4604; Email: [email protected]. †Fred H. Gowen Professor of Finance, William E. Simon Graduate School of Business Administration, University of Rochester; Tel: (585)275-2678; Email: [email protected]. ‡Assistant Professor of Finance, William E. Simon Graduate School of Business Administration, University of Rochester; Tel: (585)275-3491; Email: [email protected]. §We thank seminar participants at Michigan State University and University of Rochester for helpful comments. 1 Introduction The momentum literature, e.g., Jegadeesh and Titman (1993), finds that strategies that buy past winners and short past losers earn significantly positive average returns over the subsequent six to 12 months. -
Measuring Capital in the New Economy
This PDF is a selection from a published volume from the National Bureau of Economic Research Volume Title: Measuring Capital in the New Economy Volume Author/Editor: Carol Corrado, John Haltiwanger and Dan Sichel, editors Volume Publisher: University of Chicago Press Volume ISBN: 0-226-11612-3 Volume URL: http://www.nber.org/books/corr05-1 Conference Date: April 26-27, 2002 Publication Date: August 2005 Title: Intangible Risk Author: Lars Peter Hansen, John C. Heaton, Nan Li URL: http://www.nber.org/chapters/c10620 Chapter pages in book: (111 - 152) 4 Intangible Risk Lars Peter Hansen, John C. Heaton, and Nan Li 4.1 Introduction Accounting for the asset values by measured physical capital and other inputs arguably omits intangible sources of capital. This intangible or un- measured component of the capital stock may result because some invest- ments from accounting flow measures are not eventually embodied in the physical capital stock. Instead there may be scope for valuing ownership of a technology, for productivity enhancements induced by research and de- velopment, for firm-specific human capital, or for organizational capital. For an econometrician, intangible capital becomes a residual needed to account for values. In contrast to measurement error, omitted information, or even model approximation error, this residual seems most fruitfully cap- tured by an explicit economic model. It is conceived as an input into tech- nology whose magnitude is not directly observed. Its importance is some- times based on computing a residual contribution to production after all other measured inputs are accounted for. Alternatively it is inferred by com- paring asset values from security market data to values of physical mea- sures of firm or market capital. -
The Capital Asset Pricing Model (CAPM) of William Sharpe (1964)
Journal of Economic Perspectives—Volume 18, Number 3—Summer 2004—Pages 25–46 The Capital Asset Pricing Model: Theory and Evidence Eugene F. Fama and Kenneth R. French he capital asset pricing model (CAPM) of William Sharpe (1964) and John Lintner (1965) marks the birth of asset pricing theory (resulting in a T Nobel Prize for Sharpe in 1990). Four decades later, the CAPM is still widely used in applications, such as estimating the cost of capital for firms and evaluating the performance of managed portfolios. It is the centerpiece of MBA investment courses. Indeed, it is often the only asset pricing model taught in these courses.1 The attraction of the CAPM is that it offers powerful and intuitively pleasing predictions about how to measure risk and the relation between expected return and risk. Unfortunately, the empirical record of the model is poor—poor enough to invalidate the way it is used in applications. The CAPM’s empirical problems may reflect theoretical failings, the result of many simplifying assumptions. But they may also be caused by difficulties in implementing valid tests of the model. For example, the CAPM says that the risk of a stock should be measured relative to a compre- hensive “market portfolio” that in principle can include not just traded financial assets, but also consumer durables, real estate and human capital. Even if we take a narrow view of the model and limit its purview to traded financial assets, is it 1 Although every asset pricing model is a capital asset pricing model, the finance profession reserves the acronym CAPM for the specific model of Sharpe (1964), Lintner (1965) and Black (1972) discussed here. -
Meeting on Economic Fluctuations
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics National Bureau of Economic Research (NBER) (Ed.) Periodical Part NBER Reporter Online, Volume 1980 NBER Reporter Online Provided in Cooperation with: National Bureau of Economic Research (NBER), Cambridge, Mass. Suggested Citation: National Bureau of Economic Research (NBER) (Ed.) (1980) : NBER Reporter Online, Volume 1980, NBER Reporter Online, National Bureau of Economic Research (NBER), Cambridge, MA This Version is available at: http://hdl.handle.net/10419/62106 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu NATIONAL BUREAU OF ECONOMIC RESEARCH, INC. FALL 1980 i ~ Program Report rl i:' Labor Economics Richard B. Freeman An understanding of the operation of labor markets and the institutional and structural changes that altered employment, wages, unemployment, and productivity in past years is critically needed by those responsible for public and private policy. -
Eugene F. Fama Booth School, University of Chicago, Chicago, IL, USA
Two Pillars of Asset Pricing Prize Lecture, December 8, 2013 by Eugene F. Fama Booth School, University of Chicago, Chicago, IL, USA. he Nobel Foundation asks that the Prize lecture cover the work for which T the Prize is awarded. Te announcement of this year’s Prize cites empirical work in asset pricing. I interpret this to include work on efcient capital markets and work on developing and testing asset pricing models—the two pillars, or perhaps more descriptive, the Siamese twins of asset pricing. I start with ef- cient markets and then move on to asset pricing models. EFFICIENT CAPITAL MARKEts A. Early Work Te year 1962 was a propitious time for Ph.D. research at the University of Chi- cago. Computers were coming into their own, liberating econometricians from their mechanical calculators. It became possible to process large amounts of data quickly, at least by previous standards. Stock prices are among the most acces- sible data, and there was burgeoning interest in studying the behavior of stock returns, centered at the University of Chicago (Merton Miller, Harry Roberts, Lester Telser, and Benoit Mandelbrot as a frequent visitor) and MIT (Sidney Alexander, Paul Cootner, Franco Modigliani, and Paul Samuelson). Modigli- ani ofen visited Chicago to work with his longtime coauthor Merton Miller, so there was frequent exchange of ideas between the two schools. It was clear from the beginning that the central question is whether asset prices refect all available information—what I labeled the efcient markets hy- pothesis (Fama 1965b). Te difculty is making the hypothesis testable. We can’t 365 6490_Book.indb 365 11/4/14 2:30 PM 366 The Nobel Prizes test whether the market does what it is supposed to do unless we specify what it is supposed to do. -
B9311-13 Ph.D. Seminar in International Finance Course
Professor Robert J. Hodrick Spring Semester 2012 Uris 414 212-854-3413 [email protected] B9311-13 Ph.D. Seminar in International Finance Course Outline and Reading List The course covers current research topics in international finance. An introduction to the subject at the MBA level and additional background information can be found in Geert Bekaert and Robert J. Hodrick, (B&H), 2012, International Financial Management, 2nd Edition. Upper Saddle River, NJ: Pearson-Prentice Hall, which is available from the bookstore. The readings marked with an (*) are required. All other readings are supplementary. PDF files of the required readings will be posted on the class web site. The only requirement for the course is a paper, which will ideally lead to additional research in the area. Acceptable paper topics include a critical survey of two or three papers, the replication and extension of an empirical paper, or original theoretical or empirical research. I am on campus most weekdays, so please stop by if you have a question. I am also usually free right after class. If you would like to schedule a formal appointment, please send me an e-mail. January 25, Class 1: Foreign Exchange Markets and Interest Rate Parity B&H Chapters 2-6 *Sager, Michael J. and Mark P. Taylor, 2006, “Under the Microscope: The Structure of the Foreign Exchange Market,” International Journal of Finance and Economics 11, pp. 81- 95. *Baba, N., and F. Packer, 2009, “Interpreting Deviations from Covered Interest Parity during the Financial Market Turmoil of 2007–08,” Journal of Banking & Finance 33, 1953-1962. -
The University of Chicago Socio-Economic Disparities
THE UNIVERSITY OF CHICAGO SOCIO-ECONOMIC DISPARITIES IN PORTFOLIO COMPOSITION: THEIR HISTORICAL CAUSES AND THEIR CONSEQUENCES FOR INEQUALITY IN AMERICA A DISSERTATION SUBMITTED TO THE FACULTY OF THE DIVISION OF THE SOCIAL SCIENCES IN CANDIDACY FOR THE DEGREE OF DOCTOR OF PHILOSOPHY DEPARTMENT OF SOCIOLOGY BY MAUDE PUGLIESE CHICAGO, ILLINOIS MARCH 2016 To Laurence. Table of Contents List of Tables v List of Figures viii Acknowledgments x Abstract xii Introduction 1 Part 1. Asset Choices and Income Inequality Chapter 1. Mass Investment in Real Estate Assets: Consequences for Rates of Return to Capital and Income Inequalities 13 Part 2. The 1940s Shift in Working- and Middle-Class Investment Practices Chapter 2. A Methodology for Mapping Historical Trends in Household Portfolio Composition 63 Chapter 3. Trends in Household Portfolio Composition Across Income and Net Worth Groups from 1918 to 2013 92 Part 3. Access to Long-Term Amortized Credit and Investment Practices Chapter 4. The Great Credit Revolution: Changing Opportunities for Credit across Asset Classes 142 Chapter 5. The Uses of Credit in Wealth-Building Strategies 167 Conclusion 237 Appendix A. Measurement of Rates of Returns using PSID Data 247 Appendix B. Sub-sampling from the Original PSID Sample 260 Appendix C. Detailed Models Results From Chapter 1 263 Appendix D. Computation of Savings-Based Proxies 264 Appendix E. Comparing Savings- and Asset-Based Proxies for Investments in Assets 265 Appendix F. Summary of Changes to Federal Taxation 1918-1937 270 iii Appendix G. 1940s Trends in Investment Behaviors From Statistics of Income and Census Data 271 Appendix H. Investment Behaviors of African Americans 1950-1968 274 Appendix I.