{"title":"Information search methods and financial decisions","authors":"Yosef Bonaparte, F. Fabozzi, David Koslowsky","doi":"10.1002/rfe.1125","DOIUrl":"https://doi.org/10.1002/rfe.1125","url":null,"abstract":"","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2020-10-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1002/rfe.1125","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43279592","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}
In this paper we investigate the predictive power of cross-sectional volatility, skewness and kurtosis for future stock returns. Adding to the work of Maio (2015), who finds cross-sectional volatility to forecast a decline in the equity premium with high predictive power in-sample as well as out-of-sample, we highlight the additional role of cross-sectional skewness and cross-sectional kurtosis. We find cross-sectional skewness to deliver a significant contribution to the performance of cross-sectional volatility in the short run (less than 12 months forecasts), while cross-sectional skewness and cross-sectional kurtosis contribute significantly to the performance of cross-sectional volatility at horizons greater than 12 months. Furthermore, we document a clear benefit of including higher moments when disaggregating excess market returns along the value and size dimension. In this case, both cross-sectional skewness and cross-sectional kurtosis span the predictive quality towards large-cap and growth stocks. Overall, the addition of higher order cross-sectional moments significantly improves the predictive performance of cross-sectional volatility, a variable that is already regarded as having high predictive power with respect to the equity premium.
{"title":"Higher moments matter! Cross‐sectional (higher) moments and the predictability of stock returns","authors":"S. Stöckl, L. Kaiser","doi":"10.1002/rfe.1121","DOIUrl":"https://doi.org/10.1002/rfe.1121","url":null,"abstract":"In this paper we investigate the predictive power of cross-sectional volatility, skewness and kurtosis for future stock returns. Adding to the work of Maio (2015), who finds cross-sectional volatility to forecast a decline in the equity premium with high predictive power in-sample as well as out-of-sample, we highlight the additional role of cross-sectional skewness and cross-sectional kurtosis. We find cross-sectional skewness to deliver a significant contribution to the performance of cross-sectional volatility in the short run (less than 12 months forecasts), while cross-sectional skewness and cross-sectional kurtosis contribute significantly to the performance of cross-sectional volatility at horizons greater than 12 months. Furthermore, we document a clear benefit of including higher moments when disaggregating excess market returns along the value and size dimension. In this case, both cross-sectional skewness and cross-sectional kurtosis span the predictive quality towards large-cap and growth stocks. Overall, the addition of higher order cross-sectional moments significantly improves the predictive performance of cross-sectional volatility, a variable that is already regarded as having high predictive power with respect to the equity premium.","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2020-10-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1002/rfe.1121","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47905802","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":"From phase transitions to Modern Monetary Theory: A framework for analyzing the pandemic of 2020","authors":"Bluford H. Putnam","doi":"10.1002/rfe.1122","DOIUrl":"https://doi.org/10.1002/rfe.1122","url":null,"abstract":"","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2020-10-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1002/rfe.1122","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41243615","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}
Pub Date : 2020-10-21DOI: 10.1146/annurev-financial-110118-123113
Chester Spatt
This review addresses, from a unified perspective, the important role of conflicts of interest in various facets of asset management and advising, including managing individual portfolios, institut...
{"title":"Conflicts of Interest in Asset Management and Advising","authors":"Chester Spatt","doi":"10.1146/annurev-financial-110118-123113","DOIUrl":"https://doi.org/10.1146/annurev-financial-110118-123113","url":null,"abstract":"This review addresses, from a unified perspective, the important role of conflicts of interest in various facets of asset management and advising, including managing individual portfolios, institut...","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2020-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48685870","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}
Abstract This paper analyses the economic and financial repercussions of the 2020 COVID‐19 pandemic. It argues that the pandemic has inflicted serious injuries to the labor force but has not damaged the physical capital stock. Therefore, the resolution policies of this crisis ought to be carefully tailored to supporting structural adjustments to the labor market. The analysis asserts that the impact of the pandemic crisis is exacerbated by the identification gap between the unobserved and the officially reported cases of COVID‐19. The gap increases financial risks, including market‐, credit‐, default‐, and foreign exchange risks.
{"title":"The 2020 Pandemic: Economic repercussions and policy responses","authors":"Lucjan T. Orłowski","doi":"10.1002/rfe.1123","DOIUrl":"https://doi.org/10.1002/rfe.1123","url":null,"abstract":"Abstract This paper analyses the economic and financial repercussions of the 2020 COVID‐19 pandemic. It argues that the pandemic has inflicted serious injuries to the labor force but has not damaged the physical capital stock. Therefore, the resolution policies of this crisis ought to be carefully tailored to supporting structural adjustments to the labor market. The analysis asserts that the impact of the pandemic crisis is exacerbated by the identification gap between the unobserved and the officially reported cases of COVID‐19. The gap increases financial risks, including market‐, credit‐, default‐, and foreign exchange risks.","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2020-10-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1002/rfe.1123","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42711748","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":"Top management team optimism and its influence on firms' financing and investment decisions","authors":"Tobias Heizer, Laura R. Rettig","doi":"10.1002/rfe.1092","DOIUrl":"https://doi.org/10.1002/rfe.1092","url":null,"abstract":"","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2020-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1002/rfe.1092","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49417365","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}
Doron Avramov, Guy Kaplanski, Avanidhar Subrahmanyam
The distance between short- and long-run moving averages of prices (MAD) predicts future equity returns in the cross-section. Annualized value-weighted alphas from the accompanying hedge portfolios are around 9%, and the predictability goes beyond momentum, 52-week highs, profitability, and other prominent anomalies. MAD-based investment payoffs survive reasonable trading costs faced by institutions, and are stronger on the long side relative to the short counterpart.
{"title":"Moving average distance as a predictor of equity returns","authors":"Doron Avramov, Guy Kaplanski, Avanidhar Subrahmanyam","doi":"10.1002/rfe.1118","DOIUrl":"https://doi.org/10.1002/rfe.1118","url":null,"abstract":"The distance between short- and long-run moving averages of prices (MAD) predicts future equity returns in the cross-section. Annualized value-weighted alphas from the accompanying hedge portfolios are around 9%, and the predictability goes beyond momentum, 52-week highs, profitability, and other prominent anomalies. MAD-based investment payoffs survive reasonable trading costs faced by institutions, and are stronger on the long side relative to the short counterpart.","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2020-09-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139553638","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}
This article examines the connection between economic uncertainty and financial market conditions in South Africa, documenting that the macroeconomic implications of an uncertainty shock differs across financial regimes. A non-linear VAR is estimated where uncertainty is captured by the average volatility of structural shocks in the economy, and the transmission mechanism is characterised by two distinct financial regimes (i.e. financially stressful versus normal periods). We find that while the deterioration of output following an uncertainty shock is much more prominent during normal periods than during stressful periods, it is much more persistent during stressful financial times. The share of output variance explained by the volatility shocks in good financial times is more than double the share in bad times. Uncertainty shocks are found to be inflationary in both regimes, with the impact being larger in the stress regime. While our estimates reveals that financial frictions do not amplify the impact of uncertainty on real output, it does increase the impact on prices.
{"title":"The impact of uncertainty shocks in South Africa: The role of financial regimes","authors":"M. Balcılar, Rangan Gupta, T. Kisten","doi":"10.1002/RFE.1120","DOIUrl":"https://doi.org/10.1002/RFE.1120","url":null,"abstract":"This article examines the connection between economic uncertainty and financial market conditions in South Africa, documenting that the macroeconomic implications of an uncertainty shock differs across financial regimes. A non-linear VAR is estimated where uncertainty is captured by the average volatility of structural shocks in the economy, and the transmission mechanism is characterised by two distinct financial regimes (i.e. financially stressful versus normal periods). We find that while the deterioration of output following an uncertainty shock is much more prominent during normal periods than during stressful periods, it is much more persistent during stressful financial times. The share of output variance explained by the volatility shocks in good financial times is more than double the share in bad times. Uncertainty shocks are found to be inflationary in both regimes, with the impact being larger in the stress regime. While our estimates reveals that financial frictions do not amplify the impact of uncertainty on real output, it does increase the impact on prices.","PeriodicalId":51691,"journal":{"name":"Review of Financial Economics","volume":null,"pages":null},"PeriodicalIF":1.2,"publicationDate":"2020-09-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42661968","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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