We replicate French, Schwert, and Stambaugh (1987) (FSS) with up-to-date data and new tools from the modern toolbox of econometric methods. As we proceed, we highlight the main technical details and econometric methods from the original study and, when necessary, update them. While our main goal is to replicate FSS as carefully as possible, we also aim to help new researchers quickly gain an in-depth understanding of the major features of the original study, and to demonstrate why FSS is fundamental to the asset pricing literature. We finish by text mining the titles and abstracts of over one thousand citing studies for information on why other studies cite FSS and which parts of FSS receive the most attention. After careful replication, we confirm that the main results in FSS hold and continue to hold through 2019.
{"title":"A New Look at Expected Stock Returns and Volatility","authors":"Russell P. Robins, G. P. Smith","doi":"10.1561/104.00000130","DOIUrl":"https://doi.org/10.1561/104.00000130","url":null,"abstract":"We replicate French, Schwert, and Stambaugh (1987) (FSS) with up-to-date data and new tools from the modern toolbox of econometric methods. As we proceed, we highlight the main technical details and econometric methods from the original study and, when necessary, update them. While our main goal is to replicate FSS as carefully as possible, we also aim to help new researchers quickly gain an in-depth understanding of the major features of the original study, and to demonstrate why FSS is fundamental to the asset pricing literature. We finish by text mining the titles and abstracts of over one thousand citing studies for information on why other studies cite FSS and which parts of FSS receive the most attention. After careful replication, we confirm that the main results in FSS hold and continue to hold through 2019.","PeriodicalId":44331,"journal":{"name":"Critical Finance Review","volume":"44 1","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67075691","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Seongkyu Gilbert Park, K. C. John Wei, Linti Zhang
{"title":"The Fu (2009) Positive Relation Between Idiosyncratic Volatility and Expected Returns is Due to Look-Ahead Bias","authors":"Seongkyu Gilbert Park, K. C. John Wei, Linti Zhang","doi":"10.1561/104.00000126","DOIUrl":"https://doi.org/10.1561/104.00000126","url":null,"abstract":"","PeriodicalId":44331,"journal":{"name":"Critical Finance Review","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135989081","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Better Performance of Mutual Funds with Lower R2’s Does Not Suggest that Active Management Pays","authors":"J. C. Matallín‐Sáez","doi":"10.1561/104.00000131","DOIUrl":"https://doi.org/10.1561/104.00000131","url":null,"abstract":",","PeriodicalId":44331,"journal":{"name":"Critical Finance Review","volume":"1 1","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67075700","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Conditional Skewness in Asset Pricing: 25 Years of Out-of-Sample Evidence","authors":"Campbell R. Harvey, Akhtar Siddique","doi":"10.1561/104.00000134","DOIUrl":"https://doi.org/10.1561/104.00000134","url":null,"abstract":"","PeriodicalId":44331,"journal":{"name":"Critical Finance Review","volume":"241 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135987624","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Andrew Detzel, Jefferson Duarte, Avraham Kamara, Stephan Siegel, Celine Sun
{"title":"The Cross-Section of Volatility and Expected Returns: Then and Now","authors":"Andrew Detzel, Jefferson Duarte, Avraham Kamara, Stephan Siegel, Celine Sun","doi":"10.1561/104.00000125","DOIUrl":"https://doi.org/10.1561/104.00000125","url":null,"abstract":"","PeriodicalId":44331,"journal":{"name":"Critical Finance Review","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135989076","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Haimanot Kassa, Feifei Wang, Yan Xuemin (Sterling)
We replicate the findings of French, Schwert, and Stambaugh (FSS 1987) almost exactly. Consistent with FSS, we find modest evidence of a positive relation between market risk premium and the expected market volatility and strong evidence of a negative relation between market excess returns and the unexpected change in market volatility during 1928-1984. These results persist during 1985-2018 and are robust to alternative data and model specifications. We extend the analysis to 23 developed countries and find qualitatively similar results. We show that the risk-return tradeoff is stronger during expansions than during recessions and does not vary significantly with investor sentiment.
{"title":"Expected Stock Market Returns and Volatility: Three Decades Later","authors":"Haimanot Kassa, Feifei Wang, Yan Xuemin (Sterling)","doi":"10.1561/104.00000132","DOIUrl":"https://doi.org/10.1561/104.00000132","url":null,"abstract":"We replicate the findings of French, Schwert, and Stambaugh (FSS 1987) almost exactly. Consistent with FSS, we find modest evidence of a positive relation between market risk premium and the expected market volatility and strong evidence of a negative relation between market excess returns and the unexpected change in market volatility during 1928-1984. These results persist during 1985-2018 and are robust to alternative data and model specifications. We extend the analysis to 23 developed countries and find qualitatively similar results. We show that the risk-return tradeoff is stronger during expansions than during recessions and does not vary significantly with investor sentiment.","PeriodicalId":44331,"journal":{"name":"Critical Finance Review","volume":"1 1","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67075713","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
D. Anghel, Petre Caraiani, Alina Roşu, Ioanid Roşu
We reexamine the asset pricing performance of systematic skew-ness (“coskewness”), a risk factor in the three-moment CAPM model of Kraus and Litzenberger (1976). In an influential paper, Harvey and Siddique (2000) test a coskewness factor constructed by sorting stocks on past coskewness. We replicate and extend their paper. Overall, coskewness appears to be priced in the cross section of stocks, especially when using an alternative coskewness proxy like (i) the predicted systematic skewness ( PSS ) of Langlois (2020), where coskewness is predicted by various firm characteristics, or (ii) a modified PSS factor ( mPSS ) that uses only return-based characteristics.
{"title":"Asset Pricing with Systematic Skewness: Two Decades Later","authors":"D. Anghel, Petre Caraiani, Alina Roşu, Ioanid Roşu","doi":"10.1561/104.00000133","DOIUrl":"https://doi.org/10.1561/104.00000133","url":null,"abstract":"We reexamine the asset pricing performance of systematic skew-ness (“coskewness”), a risk factor in the three-moment CAPM model of Kraus and Litzenberger (1976). In an influential paper, Harvey and Siddique (2000) test a coskewness factor constructed by sorting stocks on past coskewness. We replicate and extend their paper. Overall, coskewness appears to be priced in the cross section of stocks, especially when using an alternative coskewness proxy like (i) the predicted systematic skewness ( PSS ) of Langlois (2020), where coskewness is predicted by various firm characteristics, or (ii) a modified PSS factor ( mPSS ) that uses only return-based characteristics.","PeriodicalId":44331,"journal":{"name":"Critical Finance Review","volume":"114 1","pages":""},"PeriodicalIF":1.6,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67075762","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Trend and Reversal of Idiosyncratic Volatility Revisited","authors":"Markus Leippold, Michal Svatoň","doi":"10.1561/104.00000129","DOIUrl":"https://doi.org/10.1561/104.00000129","url":null,"abstract":"","PeriodicalId":44331,"journal":{"name":"Critical Finance Review","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135989078","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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