• 详情 GARCH Option Pricing Models, the CBOE VIX and Variance Risk Premium
    In this paper, we derive the corresponding implied VIX formulas under the locally riskneutral valuation relationship proposed by Duan (1995) when various forms of GARCH model are proposed for S&P 500 index. The empirical study shows that the GARCH implied VIX is consistently and significantly lower than the CBOE VIX for all kinds of GARCH model investigated. Moreover, the magnitude of the difference suggests that the GARCH option pricing model is not capable of capturing the variance premium, which indicates the incompleteness of the GARCH option pricing under the locally risk-neutral valuation relationship. The source of this kind of incompleteness is then theoretically analyzed. It is shown that the framework of GARCH option pricing model fails to incorporate the price of volatility risk or variance premium.
  • 详情 Equity-link Momentum
    This paper mainly finds that there is return predictability across equity-link firms in China’s stock market. By grouping the shareholder firms according to the shocks translated from their equity-link firms, we construct long-short momentum strategy to capture abnormal return of 2.01% per month, which we call “equity-link momentum”. After an array of adjustments based on risky factors and firm characteristics, the excess returns are still significant. However, the significance of equity-link momentum returns are sensitive to various attention proxies, such as firm size, past performance, turn over and mutual funds’ joint holding measurement, which is consistent with the hypothesis of limited attention.
  • 详情 Evaluating Index Funds Performance in China
    After the first index fund launched in 1999, the index fund market has been growing steadily in China. In this paper, we seek to measure and understand the tracking error of China based index funds. The results show that sample index funds exhibit an acceptable level of tracking error in general. Furthermore, by means of decomposition of tracking error variance we find that risk structure of sample funds keeps consistency with financial theory about indexing. While there is an exception such as Hua An MSCI China A share e.g., whole performance of the better run index funds suggests that indexing is practicable under China conditions.
  • 详情 The Stock Market and Aggregate Employment
    We study the connection between the stock market and the labor market. When aggregate risk premiums are time-varying, predictive variables for market excess returns should forecast longhorizon growth in the marginal bene?t of hiring and thereby long-horizon aggregate employment growth. Consistent with this logic, we document that high values of the risk premiums forecast low payroll growth and increases in unemployment rate in the short run, but high payroll growth and decreases in unemployment rate in the long run. High values of lagged payroll growth and decreases in lagged unemployment rate also forecast low stock market excess returns.
  • 详情 Idiosyncratic Risk, Costly Arbitrage, and the Cross-Section of Stock Returns
    This paper examines the impact of idiosyncratic risk on the cross-section of weekly stock returns from 1963 to 2006. I use an exponential GARCH model to forecast expected idiosyncratic volatility and employ a combination of the size e§ect, value premium, return momentum and short-term reversal to measure relative mispricing. I ?nd that stock returns monotonically increase in idiosyncratic risk for relatively undervalued stocks and monotonically decrease in idiosyncratic risk for relatively overvalued stocks. This phenomenon is robust to various subsamples and industries, and cannot be explained by risk factors or ?rm characteristics. Further, transaction costs, short-sale constraints and information uncertainty cannot account for the role of idiosyncratic risk. Overall, these ?ndings are consistent with the limits of arbitrage arguments and demonstrate the importance of idiosyncratic risk as an arbitrage cost.
  • 详情 When Does Idiosyncratic Risk Really Matter?
    The evidence on the relation between idiosyncratic risk and future market return is at odds with the theory in Merton (1987). We argue that this is because conventional idiosyncratic risk measures are too noisy that consequently camou?age the true pricing relation suggested by the theory in empirical tests. To reduce the noise, we employ a random portfolio approach to construct an alternative aggregate idiosyncratic risk measure. Due to a high correlation between the noise components of the conventional idiosyncratic risk measure and our portfolio idiosyncratic risk measure, we include both measures simultaneously in a predictive regression, in which the conventional idiosyncratic risk measure helps to further reduce the noise in our portfolio idiosyncratic risk measure. We ?nd that both variables are signi?cant and jointly predict returns on the market with an adjusted R2 of 2%. Our results are very robust to all conventional control variables, sample periods, the size deciles.
  • 详情 When Does Idiosyncratic Risk Really Matter?
    The evidence on the relation between idiosyncratic risk and future market return is at odds with the theory in Merton (1987). We argue that this is because conventional idiosyncratic risk measures are too noisy that consequently camou?age the true pricing relation suggested by the theory in empirical tests. To reduce the noise, we employ a random portfolio approach to construct an alternative aggregate idiosyncratic risk measure. Due to a high correlation between the noise components of the conventional idiosyncratic risk measure and our portfolio idiosyncratic risk measure, we include both measures simultaneously in a predictive regression, in which the conventional idiosyncratic risk measure helps to further reduce the noise in our portfolio idiosyncratic risk measure. We ?nd that both variables are signi?cant and jointly predict returns on the market with an adjusted R2 of 2%. Our results are very robust to all conventional control variables, sample periods, the size deciles
  • 详情 Volatility Long Memory on Option Valuation
    Volatility long memory is a stylized fact that has been documented for a long time. Existing literature have two ways to model volatility long memory: component volatility models and fractionally integrated volatility models. This paper develops a new fractionally integrated GARCH model, and investigates its performance by using the Standard and Poor’s 500 index returns and cross-sectional European option data. The fractionally integrated GARCH model signi?cantly outperforms the simple GARCH(1, 1) model by generating 37% less option pricing errors. With stronger volatility persistence, it also dominates a component volatility model, who has enjoyed a reputation for its outstanding option pricing performance, by generating 15% less option pricing errors. We also con?rm the fractionally integrated GARCH model’s robustness with the latest option prices. This paper indicates that capturing volatility persistence represents a very promising direction for future study.
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  • 详情 银行个体特征对贷款行为差异性的影响
    文章从我国当前银行体系制度约束的典型事实出发,通过建立面板门限模型和面板向量自回归模型,考察了紧缩性政策下,我国银行个体特征决定贷款行为差异性的影响机制。研究表明,在以资产主导型的盈利模式,较为宽松的资本金补充机制和完善的银行间同业市场制度的约束下,如果银行的资产规模越小,资本充足率和流动性比率越高,可能会面临较高的外部融资成本,并且贷款下降幅度较大。反之,如果银行的资产规模越大,资本充足率和流动性比率越低,就会面临较低的外部融资成本,而贷款下降幅度较小。这也就意味着,由银行个体特征所引致的贷款行为差异性,有可能会弱化货币当局通过银行贷款渠道传导紧缩性政策意图的力度。