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Expected Returns and Expected Dividend Growth

Lettau, Martin; Ludvigson, Sydney C. - 2004

We investigate a consumption-based present value relation that is a function of future dividend growth. Using data on aggregate consumption and measures of the dividend payments from aggregate wealth, we show that changing forecasts of dividend growth are an important feature of the post-war...

Persistent link: https://www.econbiz.de/10005846982

Mortgage convexity

Hanson, Samuel G. - In: Journal of Financial Economics 113 (2014) 2, pp. 270-299

Most home mortgages in the United States are fixed-rate loans with an embedded prepayment option. When long-term rates decline, the effective duration of mortgage-backed securities (MBS) falls due to heightened refinancing expectations. I show that these changes in MBS duration function as...

Persistent link: https://www.econbiz.de/10010784901

News-driven return reversals: Liquidity provision ahead of earnings announcements

So, Eric C.; Wang, Sean - In: Journal of Financial Economics 114 (2014) 1, pp. 20-35

This study documents a six-fold increase in short-term return reversals during earnings announcements relative to non-announcement periods. Following prior research, we use reversals as a proxy for expected returns market makers demand for providing liquidity. Our findings highlight significant...

Persistent link: https://www.econbiz.de/10010906188

Dispersion in beliefs among active mutual funds and the cross-section of stock returns

Jiang, Hao; Sun, Zheng - In: Journal of Financial Economics 114 (2014) 2, pp. 341-365

We propose a measure of dispersion in fund managers׳ beliefs about future stock returns based on their active holdings, i.e., deviations from benchmarks. We find that both the level of and the change in dispersion positively predict subsequent stock returns on a risk-adjusted basis. This effect...

Persistent link: https://www.econbiz.de/10011039248

Displacement risk and asset returns

Gârleanu, Nicolae; Kogan, Leonid; Panageas, Stavros - In: Journal of Financial Economics 105 (2012) 3, pp. 491-510

We study asset-pricing implications of innovation in a general-equilibrium overlapping-generations economy. Innovation increases the competitive pressure on existing firms and workers, reducing the profits of existing firms and eroding the human capital of older workers. Due to the lack of...

Persistent link: https://www.econbiz.de/10011039262

Style investing, comovement and return predictability

Wahal, Sunil; Yavuz, M. Deniz - In: Journal of Financial Economics 107 (2013) 1, pp. 136-154

Barberis and Shleifer (2003) argue that style investing generates momentum and reversals in style and individual asset returns, as well as comovement between individual assets and their styles. Consistent with these predictions, in some specifications, past style returns help explain future...

Persistent link: https://www.econbiz.de/10010593834

Growth to value: Option exercise and the cross section of equity returns

Ai, Hengjie; Kiku, Dana - In: Journal of Financial Economics 107 (2013) 2, pp. 325-349

We propose a general equilibrium model to study the link between the cross section of expected returns and book-to-market characteristics. We model two primitive assets: value assets and growth assets that are options on assets in place. The cost of option exercise, which is endogenously...

Persistent link: https://www.econbiz.de/10010616813

Pricing the term structure with linear regressions

Adrian, Tobias; Crump, Richard K.; Moench, Emanuel - In: Journal of Financial Economics 110 (2013) 1, pp. 110-138

We show how to price the time series and cross section of the term structure of interest rates using a three-step linear regression approach. Our method allows computationally fast estimation of term structure models with a large number of pricing factors. We present specification tests favoring...

Persistent link: https://www.econbiz.de/10010702367

Learning and the disappearing association between governance and returns

Bebchuk, Lucian A.; Cohen, Alma; Wang, Charles C.Y. - In: Journal of Financial Economics 108 (2013) 2, pp. 323-348

The correlation between governance indices and abnormal returns documented for 1990–1999 subsequently disappeared. The correlation and its disappearance are both due to market participants' gradually learning to appreciate the difference between good-governance and poor-governance firms....

Persistent link: https://www.econbiz.de/10010664042

Did CDS trading improve the market for corporate bonds?

Das, Sanjiv; Kalimipalli, Madhu; Nayak, Subhankar - In: Journal of Financial Economics 111 (2014) 2, pp. 495-525

efficiency, quality (pricing error), and liquidity. The credit default swap (CDS) market was undoubtedly one of the salient new … markets of the past decade. In this paper we examine whether the advent of CDS trading was beneficial to the underlying … secondary market for corporate bonds. We employ econometric specifications that account for information across CDS, bond, equity …

Persistent link: https://www.econbiz.de/10010737665