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on Corporate Finance |
| By: | Grammig, Joachim; Jank, Stephan |
| Abstract: | This paper introduces Schumpeter's idea of creative destruction into asset pricing. The key point of our model is that small and value firms are more likely destroyed during technological revolutions, resulting into higher expected returns for these stocks. A two-factor model including market return and patent activity growth - the proxy for creative destruction risk - accounts for a large portion of the cross-sectional variation of size and book-to-market sorted portfolios and prices HML and SMB. The expected return difference between assets with the highest and lowest exposure to creative destruction risk amounts to 8.6 percent annually. -- |
| Keywords: | creative destruction,asset pricing,size and value premium,patents |
| JEL: | G12 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1014&r=cfn |
| By: | Chesney, Marc; Kempf, Alexander |
| Abstract: | This paper determines the value of asset tradeability in an option pricing framework. In our model, tradeability is valuable since it allows investors to exploit temporary mis-pricings of stocks. The model delivers several novel insights on the value of tradeability: The value of tradeability is the larger, the higher the pricing efficiency of the market is. Uncertainty increases the value of tradeablity, no matter whether the uncertainty results from noise trading or from new information about the fundamental value of the stock. The value of tradeability is the larger, the longer the illiquid stock cannot be traded and the more trading dates the liquid stock offers. -- |
| Keywords: | Tradeability,Liquidity,Option Pricing |
| JEL: | G13 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1011&r=cfn |
| By: | Artmann, Sabine; Finter, Philipp; Kempf, Alexander |
| Abstract: | This paper conducts a comprehensive asset pricing study based on a unique dataset for the German stock market. For the period 1963 to 2006 we show that two value characteristics (book-to-market equity, earnings-to-price) and momentum explain the cross-section of stock returns. Corresponding factor portfolios have significant premiums across various doublesorted characteristic-based test assets. In a horse race of competing asset pricing models the Fama-French 3-factor model does a poor job in explaining average stock returns, whereas the Carhart 4-factor model performs well. However, both models are inferior to a 4-factor model containing an earnings-to-price factor instead of a size factor. -- |
| Keywords: | asset pricing,characteristics,risk factors,multifactor models,Germany |
| JEL: | G12 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1001&r=cfn |
| By: | Artmann, Sabine; Finter, Philipp; Kempf, Alexander; Koch, Stefan; Theissen, Erik |
| Abstract: | This paper serves two purposes. First, we introduce a new data set on the German stock market which is publicly available to all researchers. It comprises factor returns (a market factor, a size factor, a book-to-market factor, and a momentum factor) as well as returns of portfolios which are single- and double-sorted according to market beta, size, book-to-market, and momentum. Second, we use this data set to perform asset pricing tests for the German equity market. Specifically, we test the standard CAPM, the Fama-French three-factor model, and the Carhart four-factor model. Our tests are based on a more comprehensive data set than earlier studies and we investigate the sensitivity of the results to the choice of test assets. Our results indicate that none of the models is able to consistently explain the cross-section of returns. They also demonstrate that the results of asset pricing tests are sensitive to the choice of test assets. -- |
| Keywords: | Asset Pricing,Fama,French,Carhart,Characteristics,Risk Factors,Value,Size,Momentum,Germany |
| JEL: | G12 G15 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1012&r=cfn |
| By: | Frey, Stefan; Herbst, Patrick |
| Abstract: | We present evidence of the impact of buy-side analysts on the behavior and performance of fund managers. Using data provided by a large global asset manager, we relate buy-side analysts' recommendations to fund transactions on a daily basis. Our results show that buy-side analysts have a significant influence on trading decisions: Fund managers almost certainly follow recent recommendation revisions in their trades. Fund flows and sell-side recommendations matter as well, but to a lesser extent. Positive abnormal returns to buy-side analysts' revisions are also reflected in the performance of mutual fund trades: trades triggered by buy-side recommendations have higher returns than other trades. -- |
| Keywords: | buy-side analysts,analyst recommendations,mutual funds,investment decisions,investment performance |
| JEL: | G23 G11 G29 M41 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1010&r=cfn |