Nonsynchronous data and the covariance-factor structure of returns

Article Abstract:

Evidence is presented that indicates that the standard estimator of the covariance matrix of daily returns provides a distorted view of the true covariance-factor structure. An alternative estimator, based on a model of the price-adjustment delay process, reveals roughly twice as much covariation in individual security returns. The number of factors identified also appears to increase when this estimator is employed. Since the linear space spanned by the estimated factor-loading vectors is quite sensitive to the estimator used, it is important that the consistent estimator be considered in the usual two-stage empirical investigations of the APT. (Reprinted by permission of the publisher.)

Analysis, Securities, Financial research

---

Another look at the cross-section of expected stock returns

Article Abstract:

Our examination of the cross-section of expected returns reveals economically and statistically significant compensation (about 6 to 9 percent per annum) for beta risk when betas are estimated from time-series regressions of annual portfolio returns on the annual return on the equally weighted market index. The relation between book-to-market equity and returns is weaker and less consistent than that in Fama and French (1992). We conjecture that past book-to-market results using COMPUSTAT data are affected by a selection bias and provide indirect evidence. (Reprinted by permission of the publisher.)

Prices and rates, Stocks, Portfolio management, Stock prices

---

Testing portfolio efficiency when the zero-beta rate is unknown: a note

Article Abstract:

Portfolio efficiency assessments using ratio tests can be used to establish a minimal bound on the distribution function, which can in turn be used to reject the null hypothesis without recourse to an asymptotic statistical analysis. However, the use of the capital assets pricing model becomes more complex as the zero-beta intercept is approached. The model developed, and other similar models used to test portfolio investment theories,has as one of its objectives the determination of a better portfolio structure that draws on a larger pool of assets and a better mix thereof.

Models, Economic aspects, Investments, Capital market, Capital markets

Similar abstracts:

• Abstracts: The seasonal stability of the factor structure of stock returns. On testing the Arbitrage Pricing Theory: inter-battery factor analysis
• Abstracts: Optimal capital structure, endogenous bankruptcy, and the term structure of credit spreads. Option pricing and replication with transactions costs
• Abstracts: Earnings announcements, stock price adjustment, and the existence of option markets. Turn-of-month evaluations of liquid profits and stock returns: a common explanation for the monthly and January effects
• Abstracts: Integration vs. segmentation in the Canadian stock market. Testing the CAPM with time-varying risks and returns
• Abstracts: Asset pricing and expected inflation. Wealth destruction on a massive scale? A study on acquiring-firm returns in the recent merger wave

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.