FIN 395.4 Empirical
Methods in Finance
Syllabus
1. Course Description
This course represents an
advanced study of asset pricing in financial economics. We focus on the
empirical techniques used most often in the analysis of financial markets and how
they are applied to actual market data. The list of topics includes: (a)
empirical tests of Asset Pricing Models b) statistical properties of asset
returns, (b) unconditional tests of asset pricing models (CAPM, APT), (c)
conditional tests of asset pricing models (d) efficient markets hypothesis and
anomalies, (d) behavioral finance, (e) mutual fund and fund flows, (f)
international finance, and (g) miscellaneous topics. The relative
emphasis that each topic receives within category (d-g) will likely depend on
the interests of the students.
2. Class Meetings and
Format
We will meet each Wednesday
and some Monday's 2-5 pm. Each week, I will assign relevant readings. These
readings will consist of statistical background readings at times and specific
papers in empirical financial economics. You are expected to read the material
before the class. The class will not follow a lecture format; rather, I will
act as the discussion leader and background resource, especially as it comes to
techniques or methodology. I will attempt to devise a list of discussion
questions each week to facilitate the presentation of each topic. In addition,
I will assign an empirical exercise applying a concept or technique from class
that requires the use of a statistical package on a common dataset. I would
encourage you to form study groups to discuss the papers, data assignments and
project.
3. Course Resources and
Requirements
The textbooks for the course
are The Econometrics of Financial Markets by John Campbell, Andrew Lo and
Craig MacKinlay (Princeton University Press, 1997). Chapters of Asset
Pricing by John H. Cochrane are also recommended and Ch. 1-9 is assumed as
background material. I will also assign required readings which are listed in
the outline below. I will strive to make available as many of the
supplemental (non-required) readings as possible.
The demands of this course are
likely to be computation-intensive so that some rudimentary programming and
data analysis skills are necessary.
I will not tolerate
cheating or dishonorable conduct of any kind (plagiarism (see links to “Scope of Academic
Dishonesty” and “The Standard of
Academic Integrity”, copying, lying, etc.). I will punish any
violations in accordance with University policy.
4. Grades
A. Pop Quizes,
data assignments, and class discussion. (35 percent)
B. Research Paper. Research ideas. Students are expected to come up with
research ideas from the readings. More details provided in class. (15 percent)
C. Final Examination.
This exam will take place during the scheduled time in the 11th week of the
quarter and will last 2 hours. It is designed to act as a dry-run test for the
Finance Theory exam. (35 percent)
D. Classroom Presentation.
Students are expected to participate actively in all classroom discussions.
However, each student will act as discussion leader for one of the special
topics sessions (selected in consultation with the instructor) in the 13 and
14th weeks of the semester. The presentation should comprise a critical review
of the articles selected. (15 percent)
5. Background References
Students should also avail
themselves of the following useful reference books:
6. Course
Outline
Parts of this course are
similar to in nature to that from Andrew Karolyi. He designed the coures by seeking input from professors teaching in the top
doctoral programs in the
The topics covered in the
course are divided into 14 sections, as outlined below. We will cover topic I
to X comprehensively in class. I will encourage the students to choose a topic
from (IX to XV) for their presentations which will take place during the final
week of the quarter.
I. Asset Pricing Theory
(Ch. 1-10 from Cochrane's on-line text).
II. Introduction to
Empirical Asset Pricing
III. The Random Character of Stock Market Prices
(a) Unconditional Distributions
(b) Conditional Distributions
i. Conditional Means - Mean Reversion
ii. Conditional Means - Instrumental Variables
iii. Conditional Variances
iv. Relationship between Means and Variances
(c) Stock Returns and Volume
IV. Capital Asset Pricing Model
(a) FM
Methodology
(b) Unconditional Tests
(c) Conditional Tests - Time Varying Means/Variances
V. The Arbitrage Pricing Theory
(a) Unconditional Tests
(b) Conditional Tests and Extensions
VI. Efficient Markets Hypothesis
(a) Variance Bounds Tests
(b) Anomalies
(c) Price Momentum
(d) Over-reaction and BE/ME
(e) Earnings Momentum
(f) Post-earnings Announcement Drift
VII. Behavioral Finance
(a) Theoretical papers
(b) Empirical papers
i. Bubble Theory
ii. Bubble Empirical
iii. Seasonal Effects
VIII. International Finance
(a) International Asset Pricing
(b) Exchange Rate Exposure
(c) Other International Finance Issues-- Linkages, Correlations, etc.
(d) Capital Flows and Contagion
(c) Other issues
IX. Investors and Mutual Funds
(a) Institutional Investors
(b) Flows
(c) Performance Evaluation and Mutual funds
(d) Hedge Funds
(e) Short-term behavior and Herding
X. Market Microstructure
(a) Classics
(b) Institutional Aspects of Market Structure
(c) Non-Synchronous Trading and Measurement Biases
(d) Bid-Ask Spreads and Price Discreteness
(e) Price Discovery
(f) Market Design
(g) Microstructure with parts of Finance
(h) Short-sales
XI. Analyst Forecast
XII. Volume/Volatility
XIII. Consumption and Production Based Asset
Pricing Models
(a) Consumption Based
(c) Habit Formation Models
(d) Production Based Models
XIV. Bayesian Studies in
Finance
XV. Event Study Methodology
(a) Traditional Approaches
(b) Long-run Performance Measurement
XVI. Fixed Income
Securities
(a) Term Structure of Interest Rates
(b) Pricing Debt with Default Risk
XVII. Pricing Options, Futures and Other
Derivative Assets
(a) Option Pricing Models
(b) Futures and Forward Prices
(c) Collateralized Debt Obligations (CDOs)
XVIII. Non-Standard Approaches in Finance
(a) Chaos and Nonlinear Dynamics in Stock Returns
(b) Technical Trading Rules
7. References
The references below are
classified into three categories: (r) denotes a required reading that will be
discussed in class, (s), a supplemental reading, and (m) represents a
background methodological article that students may attempt to read.
(s) Chapter 1
(s) Merton, R. C., 1973,
“An intertemporal capital asset pricing model,” Econometrica
41, 867-887.
(s) Ross, S. A., 1976,
“The arbitrage theory of capital asset pricing,” Journal of
Economic Theory 13, 341-360.
(s) Campbell, John Y., 2000,
"Asset
Pricing at the New Millennium," Journal of Finance 55,
1515-1568.
II. Introduction to Empirical Testing
(s)
Popper, K. R., 1957, “Science:
Conjectures and Refutations” in Conjectures
and refutations: The growth of scientific knowledge (Routledge).
(s) Silvey,
S. D., 1975, Statistical Inference, Chapter 1.
(r) Leamer,
E., 1983, "Let's
Take the Con Out of Econometrics," American Economic Review 73,
31-43.
(s)
McAleer, Michael, Adrian R. Pagan, and Paul A.
Volker, 1985, “What Will
Take the Con Out of Econometrics?”, The American Economic Review
75, 293-307.
(s) McCloskey, 1985, "The
Loss Function has been Mislaid: The Rhetoric of Significance Tests," American
Economic Review 75, 201-205.
(s) Duhem,
(s) Popper, Karl, 1987,
"Science: Conjectures and Refutations," In: Kourany,
J.(ed.), "Scientific Knowledge," 139-155.
(s) Cox, D., 1990, "Role
of Models in Statistical Analysis," Statistical Science 5, 169-74.
(s) De Long, J. Bradford and Kevin Lang,
1992, "Are
All Economic Hypotheses False?" Journal of Political Economy
100, 1257-1272.
(s)
Friedman, M., 1994, “The
Methodology of Positive Economics”, The
Philosophy of Economics: An Anthology 2, 180–213.
(s) Card, David and Alan B.
Krueger, 1995, "Time-series
minimum-wage studies: A meta-analysis," American Economic
Review 85, 238-244.
(s) McCloskey, Deirdre N. and
Stephen T. Ziliak, 1996, "The
standard error of regressions," Journal of Economic Literature
34, 97-115.
(s) Sokal, Alan D., 1996, "A Physicist Experiments with Cultural Studies", New York University.
(r) Campbell, J., A. Lo and C.
MacKinlay, 1997, "Chapter 1: Introduction" in The Econometrics of
Financial Markets. Focus on Sections 1.1 to 1.4
(s) Cochrane, John, 2002,
"Stocks
as Money: Convenience Yield and the Tech-Stock Bubble."
(r) Ziliak, Stephen
T., and Deirdre N. McCloskey, 2004, “Size
Matters: The Standard Error of Regressions in the
American Economic Review”, Journal of Socio-Economics 33,
527-546.
(s)
III. The Random Character of Stock
Market Prices
A.
Unconditional Distributions
(s)
Bachelier, L., 1900, "Theorie de la Speculation," Annales de l'Ecole
Normale Superieure 3, Gauthier-Villars, Paris.
(s) Cootner,
P., ed., 1964, The Random Character of Stock Market Prices,
(s) Fama, E., 1965, "The
Behavior of Stock Prices," Journal of Business 38, 34-105.
(s) Blattberg,
R. and
(r) Fama, E., 1976, Foundations of
Finance.
(s) Kon,
S., 1984, "Models of Stock Returns: A Comparison," Journal of
Finance 39, 148-165.
(s) Harris, L., 1986, "A Transactions
Data Study of Weekly and Intradaily Patterns in Stock
Returns," Journal of Financial Economics 16, 99-117.
B.1 Conditional Means - Mean
Reversion
(m) Dickey, D. and W. Fuller,
1981, "Likelihood Ratio Statistics for Autoregressive Time Series with a
Unit Root" Econometrica 49, 1057-1072.
(s) Conrad, J. and G. Kaul, 1988, "Time Variation in Expected Returns,"
Journal of Business, 409-426.
(s) Fama, E. and K. French,
1988, "Permanent and Temporary Components of Stock Prices," Journal
of Political Economy 96, 246-273.
(s) Lo, A. and C. MacKinlay,
1988, "Stock Market Prices Do Not Follow Random Walks: Evidence from a
Simple Specification Test," Review of Financial Studies 1, 41-66.
(s) Poterba, J. and L.
Summers, 1988, "Mean Reversion in Stock Returns: Evidence and
Implications," Journal of Financial Economics 22, 27-60.
(m) Lo, A. and C. MacKinlay,
1989, "The Size and Power of the Variance Ratio Test in Finite Samples: A
(m) Schwert, G., 1989,
"Tests for Unit Roots: A
(s) Jegadeesh, Narasimhan,
1990, "Evidence
of Predictable Behavior of Security Returns," Journal of Finance
45, 881-898.
(s)
(s) Kim, M., C. Nelson, and R.
Startz, 1991, "Mean Reversion in Stock Prices:
Evidence and Implications," Review of Economic Studies 58, 515-528.
(s) Lo, A., 1991,
"Long-Term Memory in Stock Market Prices," Econometrica 59,
1279-1313.
(r) Campbell, J., A. Lo and C.
MacKinlay, 1993, "Chapter 2: Predictability of Asset Returns" in The
Econometrics of Financial Markets.
(r) Mech,
Timothy S., 1993, "Portfolio
return autocorrelation," Journal of Financial Economics 34,
307-338.
(s) Boudoukh,
J., M. Richardson and R. Whitelaw, 1994, "A Tale of Three
Schools: Insights on Autocorrelations of Short-Horizon Stock Returns,"
Review of Financial Studies 7, 539-573.
(m) Hamilton, J., 1994, Time
Series Analysis, Chapter 1-2.
(m) Hamilton, J., 1994, Time
Series Analysis, Chapter 17.
(s) Jegadeesh, Narasimhan and
(s) Kandel, S. and R.
Stambaugh, 1996, "On the Predictability of Stock Returns: An Asset
Allocation Perspective," Journal of Finance 51, 385-424.
(s) Chordia, Tarun and Bhaskaran Swaminathan, 2000, "Trading
Volume and Cross-Autocorrelations in Stock Returns," Journal of
Finance 55, 913-935.
(r)
B.2
Conditional Means - Instrumental Variables
(s) Fama, E. and
(s) Fama, E. and M. Gibbons,
1982, "Inflation, Real Returns and Capital Investment," Journal of
Monetary Economics 9, 297-323.
(s) Fama, E. and K. French,
1988, "Dividend Yields and Expected Stock Returns," Journal of
Financial Economics 22, 3-26.
(r) Fama, E. and K. French, 1989,
"Business Conditions and Expected Returns on Stocks and Bonds," Journal
of Financial Economics 25, 23-50.
(s) Keim, D. and R. Stambaugh,
1989, "Predicting Returns in the Stock and Bond Markets," Journal
of Financial Economics 17, 357-390.
(r) Bossaerts,
P., and P. Hillion, 1999, "Implementing
Statistical Criteria to Select Return Forecasting Models: What Do We Learn?" Review of Financial Studies 12,
405-428.
(s) Cremers, Martijn,
2002, “Stock
Return Predictability: A Bayesian Model Selection Perspective,” Review
of Financial Studies, Vol. 15, No. 4, 1223-1249.
(s) Goyal, Amit and Ivo Welch, 2003, "Predicting the Equity Premium with Dividend Ratios," Management Science 49, 639-654.
(s) Lewellen, J., 2004, "Predicting returns with financial ratios", Journal of Financial Economics 74, 209-235.
(s) Campbell, J. Y., and M. Yogo, 2006, “Efficient tests of stock return predictability”, Journal of Financial Economics 81, 27-60.
(s) Henkel,
Sam, Martin J. Spencer, and Federico Nardari, 2006, “TimeVarying
Short-Horizon Predictability,” Unpublished Working Paper,
(s) Ang, A., and G. Bekaert, 2007, "Stock return predictability: Is it there?", Review of Financial Studies 20, 651.
(r) Boudoukh, Jacob,
Matthew Richardson, and Robert F. Whitelaw, 2008, “The
Myth of Long-Horizon Predictability”, Review Financial Studies
21, 1577-1605.
(s) Campbell, J. Y., and S. B. Thompson, 2008, Predicting the equity premium out of sample: Can anything beat the historical average?, Review of Financial Studies 21, 1509-1531.
(s) Cochrane, John H.,
2008, “The
Dog that Did not Bark: A Defense of Return
Predictability”, Review of Financial Studies 21, 1533-1575.
(r)
Welch, Ivo, and Amit Goyal, 2008, “A
Comprehensive Look at the Empirical Performance of Equity Premium
Prediction”, Review Financial Studies 21, 1455-1508.
(r) Santa-Clara, Pedro, 2008, “Forecasting
Stock Market Returns: The Sum of the Parts is More Than
the Whole”, Working Paper, UCLA.
B.3 Conditional Variances
(s) Christie, A., 1982,
"The Stochastic Behavior of Common Stock Variances: Value, Leverage and
Interest Rate Effects," Journal of Financial Economics 10, 407-432.
(m) Engle, R., 1982,
"Autoregressive Conditional Heteroskedasticity with Estimates of the
Variance of
(s) Bollerslev, T., 1986,
"A Conditionally Heteroskedastic Time Series Model for Speculative Prices
and Rates of Return," Review of Economics and Statistics 69,
542-547.
(s) French, K. and R. Roll,
1986, "Stock Return Variances: The Arrival of Information and the Reaction
of Traders," Journal of Financial Economics 17, 5-26.
(m) Bollerslev, T., 1986,
"Generalized Autoregressive Conditional Heteroscedasticity," Journal
of Econometrics 31, 307-327.
(s) Akgiray,
V., 1989, "Conditional Heteroscedasticity in Time Series of Stock
Returns," Journal of Business 62, 55-80.
(m) Bollerslev, T., Chou, R.
and K.Kroner, 1990, "ARCH Modeling in Finance: A
Review of the Theory and Empirical Evidence," Journal of Econometrics
52, 5-59.
(s) Pagan, A. and G. Schwert,
1990, "Alternative Models for Conditional Stock Volatility," Journal
of Econometrics 45, 267-290.
(s) Schwert, G., 1990,
"Why Does Stock Market Volatility Change Over Time," Journal of
Finance 44, 1115-1153.
(s) Campbell, J., A. Lo and C.
MacKinlay, 1993, "Chapter 12: Nonlinearities in Financial Data" in The
Econometrics of Financial Markets. Sections 12.1 and 12.2 only.
(m) Hamilton, J., 1994, Time
Series Analysis, Chapter 21.
(s) Pagan, A., 1996, "The
Econometrics of Financial Markets" Journal of Empirical Finance 3,
15-102.
B.4 Relationship between Conditional Means and Variances
(s) Merton, R., 1980, "On
Estimating the Expected Return on the Market," Journal of Financial
Economics 8, 323-362.
(s) French, K., Schwert, W.
and R. Stambaugh, 1987, "Expected Stock Returns and Volatility," Journal
of Financial Economics 19, 3-30.
(m) Chou, R., 1988,
"Volatility Persistence and Stock Valuations," Journal of Applied
Econometrics 3, 279-294.
(m) Pagan, A. and A. Ullah, 1988, "The Econometric Analysis of Models with
Risk Terms," Journal of Applied Econometrics 3, 87-105.
(s) Hamao Y., R. Masulis and
V. Ng, 1990, "Correlations in Price Changes and Volatility Across
International Stock Markets," Review of Financial Studies 3, 281-307.
(s) Nelson, D., 1991,
"Conditional Heteroscedasticty in Asset Returns:A New Approach," Econometrica 59,
347-370.
C. Stock Returns and Volume
(s) Westerfield,
R., 1977, "The Distribution of Common Stock Price Changes: An Application of
Transactions Time and Subordinated Stochastic Models," Journal of
Financial and Quantitative Analysis 12, 743-765.
(s) Tauchen,
G. and M. Pitts, 1983, "The Price Variability-Volume Relationship on
Speculative Markets," Econometrica 51, 485-505.
(s) Harris, L., 1987,
"Transactions Data Tests of the Mixture of Distributions Hypothesis,"
Journal of Financial and Quantitative Analysis 22, 127-141.
(s) Karpoff,
J., 1987, "The Relation between Price Changes and Trading Volume: A
Survey," Journal of Financial and Quantitative Analysis 22,
109-126.
(s) Lamoureux,
C. and
(s) Gallant, R., Rossi, P. and
G. Tauchen, 1992, "Stock Prices and Volume,"
Review of Financial Studies 5, 199-242.
(s) Campbell, J., Grossman, S.
and J. Wang, 1993, "Trading Volume and Serial Correlation," Quarterly
Journal of Economics 108, 905-939.
(s) Jones, C., G. Kaul and M. Lipson, 1994 "Transactions,
Volume and Volatility," Review of Financial Studies 7, 631-651.
(s) Andersen, T., 1996,
"Return Volatility and Trading Volume: An Information Flow Interpretation
of Stochastic Volatility," Journal of Finance 51, 169-203.
(s) Chan, Kalok,
and Fong, Wai-Ming, 2000, "Trade size, order
imbalance, and the volatility-volume relation," Journal of Financial
Economics 57, 247-273.
(s) Chordia, Tarun, Richard Roll, and
Avanidhar Subrahmanyam, 2001, “Market
Liquidity and Trading Activity,” Journal of Finance 56,
501-530.
(s) Gervais,
Simon, Ron Kaniel and Dan H. Mingelgrin, 2001, "The
High-Volume Return Premium" The Journal of Finance 56, 877-919.
(s)
(s)
Chordia, Tarun, Sahn-Wook Huh, and Avanidhar
Subrahmanyam, 2007, “The
Cross-Section of Expected Trading Activity”, Review of Financial
Studies 20, 709-740.
IV. The Capital Asset Pricing Model
(r)
Campbell, J., A. Lo and C. MacKinlay, 1993, "Chapter 5: The Capital Asset
Pricing Model" in The Econometrics of Financial Markets.
(r)
Cochrane (Ch 12)
(s) Petersen, Mitchell
A., 2009, “Estimating
Standard Errors in Finance Panel Data Sets: Comparing Approaches”, Review
of Financial Studies 22, 435-480.
(r)
Black, F., Jensen, M. and M. Scholes, 1972, "The Capital Asset Pricing
Model: Some Empirical Tests," in M. Jensen ed., Studies in the Theory
of Capital Markets.
(r)
Fama, E. and J. MacBeth, 1973, "Risk, Return, and Equilibrium: Empirical
Tests," Journal of Political Economy 91, 607-636.
(s) Fama, E., 1976,
Foundations of
Finance.
(s) Roll, R., 1977, "A
Critique of the Asset Pricing Theory's Tests Part 1: On Past and Potential
Testability of the Theory," Journal of Financial Economics 4,
129-176.
(m) Buse,
A., 1982, "The Likelihood Ratio, Wald and Lagrange Multiplier Tests: An
Expository Note," American Statistician 36, 153-157.
(s) Gibbons, M., 1982,
"Multivariate Tests of Financial Models: A New Approach," Journal
of Financial Economics 10, 3-27.
(m) Anderson, T., 1984, An
Introduction to Multivariate Statistical Analysis,
(s) Kandel, S., 1985,
"The Likelihood Ratio Test Statistic of Mean-Variance Efficiency of a
Given Portfolio," Journal of Financial Economics 13, 575-592.
(s) Shanken, J., 1985,
"Multivariate Tests of the Zero-Beta CAPM," Journal of Financial
Economics 14, 327-348.
(s) MacKinlay, C., 1987,
"On Multivariate Tests of the CAPM," Journal of Financial
Economics 18, 341-371.
(s) Huberman, G. and S.
Kandel, 1988, "Mean-Variance Spanning," Journal of Finance 43,
873-888.
(s) Gibbons, M., Ross, S. and
J. Shanken, 1989, "A Test of the Efficiency of a Given Portfolio," Econometrica
57, 1121-1152.
(s) Lo, A. and C. MacKinlay,
1990, "Data Snooping Biases in Tests of Financial Asset Pricing
Models," Review of Financial Studies 3, 431-468.
(r)
Fama, E. and K. French, 1992, "The Cross-Section of Expected Stock
Returns," Journal of Finance 47, 427-465.
(s)
(s) Kothari, S., J. Shanken
and R. Sloan, 1995 "Another
Look at the Cross-section of Expected Stock Returns," Journal of
Finance 50, 185-224.
C.
Conditional Tests with Time Varying Means and Variances
(s) Hansen, L., 1982,
"Large Sample Properties of Generalized Method of Moments
Estimators," Econometrica 50, 1029-1054.
(m) Hansen, L. and K.
Singleton, 1982, "Generalized Instrumental Variables Estimation of
Nonlinear Rational Expectations Models," Econometrica 50,
1269-1286. (Errata in Volume 52, 267-268.)
(s) Gibbons, M. and W. Ferson,
1985, "Testing Asset Pricing Models with Changing Expectations and an
Unobservable Market Portfolio," Journal of Financial Economics 14,
217-236.
(s) Ferson, W.,
(s) Bollerslev, T., R. Engle
and J. Wooldridge, 1988, "A Capital Asset Pricing Model with Time Varying
Covariances," Journal of Political Economy 96, 116-131.
(s)
(s)
(s) Chan, K.C., G.A. Karolyi
and R. Stulz, 1992, "Global Financial Markets and the Risk Premium on
(s) Campbell, J., A. Lo and C.
MacKinlay, 1993, "Appendix A.2 and A.4: Generalized Method of Moments and
Maximum Likelihood" in The Econometrics of Financial Markets. )
Campbell, J., A. Lo and C. MacKinlay, 1993, "Appendix A.2 and A.4:
Generalized Method of Moments and Maximum Likelihood" in The
Econometrics of Financial Markets.
(m) Duffie,
D. and K. Singleton, 1993, "Simulated Moments Estimation of Markov Models
of Asset Prices," Econometrica 61, 929-952.
(s) Ferson, W., S. Foerster, and D. Keim, 1993, "General Tests of Latent
Variable Models and Mean-Variance Spanning," Journal of Finance 48,
131-155.
(s) Ogaki, Masao, 1993,
Generalized Method of Moments: Econometric Applications, Handbook of
Statistics, Vol 11.
(m) Hamilton, J., 1994, Time
Series Analysis, Chapter 14.
(s) Jagannathan, R. and Z.
Wang, 1996, "The
Conditional CAPM and the Cross-Section of Expected Returns," Journal
of Finance 51, 3-54.
(s) Cochrane, 2001, GMM sections (Ch. 10, Ch. 11 Optional).
(s) Fama, E. F., and K. R. French, 2004, ""The Capital Asset Pricing Model: Theory and Evidence", Journal of Economic Perspectives 18, 25-46.
(s) Lewellen, Jonathan and Stefan Nagel, 2006, “The Conditional CAPM Does Not Explain Asset-Pricing Anomalies,” Forthcoming in the Journal of Financial Economics
(s) Jagannathan, R., and Y. Wang, 2007, "Lazy Investors, Discretionary Consumption, and the Cross-Section of Stock Returns", Journal of Finance 62, 1623-1661.
V. The Arbitrage Pricing Theory
(r)
Campbell, J., A. Lo and C. MacKinlay, 1993, "Chapter 6: Multifactor
Pricing Models" in The Econometrics of Financial Markets.
(s) Ferson, W., 1994,
"Theory and Empirical Testing of Asset Pricing Models," in The
Finance Handbook, Jarrow, R., W. Ziemba and V. Maksimovic, (eds),
North-Holland Publishers.
A. Unconditional Tests
(s) Roll, R. and S. Ross,
1980, "An Empirical Investigation of the Arbitrage Pricing Theory," Journal
of Finance 35, 1073-1103.
(s) Shanken, J., 1982,
"The Arbitrage Pricing Theory: Is It Testable?" Journal of Finance
37, 1129-1140.
(s) Chen, N., 1983, "Some
Empirical Tests of Arbitrage Pricing," Journal of Finance 38,
1393-1414.
(s) Dhrymes,
P., Friend,
(m) Anderson, T., 1984, An
Introduction to Multivariate Statistical Analysis,
(s) Roll, R. and S. Ross,
1984, "A Critical Reexamination of the Empirical Evidence on the Arbitrage
Pricing Theory: A Reply," Journal of Finance 39, 347-350.
(s) Chan, K.C., N. Chen
and D. Hsieh, 1985, "An Exploratory Investigation of the Firm Size
Effect," Journal of Financial Economics 14, 451-471.
(s) Dybvig,
P. and S. Ross, 1985, "Yes, the APT is Testable," Journal of
Finance 40, 1173-1188.
(s) Shanken, J., 1985,
"Multi-Beta CAPM or Equilibrium APT?: A Reply," Journal of Finance
40, 1189-1196.
(r)
Chen, N., Roll, R. and S. Ross, 1986, "Economic Forces and the Stock
Market: Testing the APT and Alternative Asset Pricing Theories," Journal
of Business 59, 383-403.
(s) Trzcinka,
C., 1986, "On the Number of Factors in the Arbitrage Pricing Model," Journal
of Finance 41, 347-368.
(s) Huberman, G., S. Kandel
and R. Stambaugh, 1987, "Mimicking Portfolios and Exact Arbitrage
Pricing," Journal of Finance 42, 1-10.
(s) Connor, G. and R.
Korajczyk, 1988, "Risk and Return in an Equilibrium APT: Application of a
New Test Methodology," Journal of Financial Economics 21, 255-289.
(s) Lehmann,
B. and D. Modest, 1988, "The Empirical Foundations of the Arbitrage
Pricing Theory," Journal of Financial Economics 21, 213-254.
(s) Shukla,
R. and C. Trzcinka, 1990, "Sequential Tests of
the Arbitrage Pricing Theory: A Comparison of Principal Components and Maximum
Likelihood Factors," Journal of Finance 45, 1541-1564.
(r)
Fama, Eugene F., and Kenneth R. French, 1993, Common risk factors in the
returns on stocks and bonds, Journal of Financial Economics 33, 3-56.
B. Conditional Tests and Extensions
(s) Ferson, W. and C. Harvey,
1991, "The Variation of Economic Risk Premiums," Journal of
Political Economy 99, 385-415.
(s) Bansal, R. and
(s) Bansal, R., D. Hsieh, and
S. Viswanathan, 1993, "A New Approach to
International Arbitrage Pricing," Journal of Finance 48,
1719-1747..
(s) Connor, G. and R.
Korajczyk, 1995, "The Arbitrage Pricing Theory and Multifactor Models of
Asset Returns," Finance, Handbooks in Operations Research and
Management Science Volume 9, Ch. 4.
(s) Chan, L., J. Karceski and
J. Lakonshok, 1998, "The Risk and Return from
Factors" Journal of Financial and Quantitative Analysis 33,
159-187.
(s) Ghysels,
E., 1998, "On Stable Factor Structures in the Pricing of Risk: Do
Time-Varying Betas Help or Hurt?" Journal of Finance 53, 549-573.
(s) Jagannathan, R. and Z.
Wang, 1998, "An Asymptotic Theory for Estimating Beta-Pricing Models Using
Cross-sectional Regression," Journal of Finance 53, 1285-1309.
(s) Ferson, Wayne E. and
(s) Wang, Kevin Q., 2003, “Asset
Pricing with Conditioning Information: A New Test,” Journal
of Finance 58, 161-196.
(s) Campbell, John Y. and Tuomo
Vuolteenaho, 2004, “Inflation
Illusion and Stock Prices,” The American Economic Review 94,
19-23.
VI. The Efficient Markets Hypothesis
(s) Fama, E., 1970,
"Efficient Capital Markets: A Review of Theory and Empirical Work," Journal
of Finance 25, 383-417.
(s) Fama, E., 1976, Foundations of
Finance.
(s) Grossman, S. and J.
Stiglitz, 1980, "On the Impossibility of Informationally Efficient
Markets," American Economic Review 70, 393-408.
(s) Grossman, S., 1989, The
Informational Role of Prices.
(s) Fama, E., 1991,
"Efficient Capital Markets: II," Journal of Finance 46,
1575-1617.
A. Variance Bounds Tests
(s) LeRoy,
S. and R. Porter, 1981, "The Present Value Relation: Tests Based on
Variance Bounds," Econometrica 49, 555-574.
(s) Shiller, R., 1981,
"Do Stock Prices Move Too Much To Be Justified By Subsequent Changes in
Dividends?" American Economic Review 71, 421-436.
(s) Flavin,
M., 1983, "Excess Volatility in the Financial Markets: A Reassessment of
the Empirical Evidence," Journal of Political Economy 91, 929-956.
(s) Kleidon,
A., 1986, "Variance Bounds Tests and Stock Price Valuation Models," Journal
of Political Economy 94, 953-1001.
(s) Marsh, T. and R. Merton,
1986, "Dividend Variability and Variance Bounds Tests for the Rationality
of Stock Market Prices," American Economic Review 76, 483-498.
(s) Campbell, J. and R.
Shiller, 1987, "Co-integration and Tests of Present Value Models," Journal
of Political Economy 95, 1062-1088.
(m) Engle, R. and C. Granger,
1987, "Co-Integration & Error Correction: Representation, Estimation
and Testing," Econometrica 55, 251-276.
(m) Johansen, S., 1988,
"Statistical Analysis of Cointegrating Vectors," Journal of
Economics, Dynamics and Control 12, 231-254.
(s) West, K., 1988,
"Dividend Innovations and Stock Price Volatility," Econometrica
56, 37-61.
(s) LeRoy,
S., 1989, "Efficient Capital Markets and Martingales," Journal of
Economic Literature 27, 1583-1621.
(m) Johansen, S., 1991,
"Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian
Vector Autoregressive Models," Econometrica 59, 1551-1581.
(s) Bollerslev, T. and R. Hodrick, 1992, "Financial Market Efficiency
Tests," in The Handbook of Applied Econometrics, I, Macroeconomics,
M. Pesaran and R. Wickins (eds),
North-Holland Publishers.
(s) Kothari, S. and J.
Shanken, 1992, "Stock Return Variation and Expected Dividends: A
Time-Series and Cross-Sectional Analysis," Journal of Financial
Economics 31, 177-210.
(r)
Campbell, J., A. Lo and C. MacKinlay, 1993, "Chapter 7: Present Value
Relations" in The Econometrics of Financial Markets.
(s) Ackert,
L. and B. Smith, 1993, "Stock Price Volatility, Ordinary Dividends, and
Other Cash Flows to Shareholders," Journal of Finance 48,
1147-1159.
(m) Hamilton, J., 1994, Time
Series Analysis, Chapter 17.
(s) Lee, Bong-Soo, 1998, "Permanent, Temporary and Non-Fundamental
Components of Stock Prices" Journal of Financial and Quantitative
Analysis 33, 1-32.
B. Anomalies
(s) Banz, R., 1981, "The
Relationship Between Return and Market Value of Common Stock," Journal
of Financial Economics 9, 3-18.
(s) Reinganum,
M., 1981, "Misspecification of Capital Asset Pricing: Empirical Anomalies
Based on Earnings Yields and Market Values," Journal of Financial
Economics 9, 19-46.
(s) Keim, D., 1983,
"Size-Related Anomalies and Stock Return Seasonality: Further Empirical
Evidence," Journal of Financial Economics 12, 13-32.
(s) Rosenberg, B., Reid, K.
and R. Lanstein, 1985, "Persuasive Evidence of
Market Inefficiency," Journal of Portfolio Management 12, 9-16.
(s) Lakonishok, J. and S. Smidt, 1988, "Are Seasonal Anomalies Real? A
Ninety-Year Perspective," Review of Financial Studies 1, 403-427.
(s) Jegadeesh, N., 1990,
“Evidence of predictable behavior of security returns,” Journal
of Finance 45, 881-898.
(s) Lehmann,
B., 1990, "Fads, Martingales, and Market Efficiency," Quarterly
Journal of Economics 105, 1-28.
(s) Lo, A. and C. MacKinlay,
1990, "When Are Contrarian Profits Due to Stock Market Overreaction?"
Review of Financial Studies 3, 175-207.
(s) Zarowin,
P., 1990, "Size, Seasonality and Stock Market Overreaction," Journal
of Financial and Quantitative Analysis 25, 113-125.
(s) Chopra, N., Lakonishok, J.
and J. Ritter, 1992, "Measuring Abnormal Performance: Do Stocks
Overreact?" Journal of Financial Economics 31, 235-268.
(r) Jegadeesh, N. and S. Titman,
1993, "Returns to Buying Winners and Selling Losers: Implications for
Stock Market Efficiency," Journal of Finance 48, 65-91.
(s) Badrinath,
S., J. Kale, and T. Noe, 1995, "Of Shepherds,
Sheep and the Cross-autocorrelation in Equity Returns" Review of
Financial Studies 8, 401-430.
(s) Chan, L.,
(s) Loughran, T., and J. R.
Ritter, 1996, “Long-term market overreaction: The effect of low-priced
stocks,” Journal of Finance 51, 1959-1970.
(s) Liew,
Jimmy and Maria Vassalou, 1999, "Can
book-to-market, size and momentum be risk factors that predict economic
growth?" Journal of Financial Economics 57, 221-245.
(s) Hong, H., T. Lim, and J.
C. Stein, 2000, “Bad
News Travels Slowly: Size, Analyst Coverage, and the Profitability of Momentum
Strategies,” Journal of Finance 55, 265-295.
(s) Grundy, Bruce D. and J.
Spencer Martin, 2001, "Understanding
the Nature of the Risks and the Source of the Rewards to Momentum Investing,"
Review of Financial Studies 14, 29-78.
(r) Jegadeesh, N. and S. Titman,
2001, "Profitability
of Momentum Strategies: An Evaluation of Alternative Explanations." Journal
of Finance 56, 699-720.
(s)
Chordia, Tarun and Lakshmanan Shivakumar, 2002, “Momentum,
Business Cycle, and Time-Varying Expected Returns,” Journal of
Finance 57, 985-1019.
(s)
Lewellen, Jonathan, 2002, Momentum and autocorrelation in stock returns, Review
of Financial Studies 15, 533-564.
(r)
(s)
Cooper, M. J., R. C. Gutierrez, and A. Hameed, 2004,
Market states and momentum, The Journal of Finance 59, 1345-1365.
(s) Korajczyk, Robert A. and
Ronnie Sadka, 2004, “Are
Momentum Profits Robust to Trading Costs?” Journal of Finance
59, 1039-1082.
(s) Grinblatt, Mark and Tobias
J. Moskowitz, 2004, “Predicting
stock price movements from past returns: the role of consistency and tax-loss
selling,” Journal of Financial Economics 71, 541-579.
(r)
Grinblatt, Mark and Bing Han, 2005, “Prospect
theory, mental accounting, and momentum,” Journal of Financial
Economics 78, 311-339.
(s)
Sadka, R., 2006, Momentum and
post-earnings-announcement drift anomalies: The role of liquidity risk, Journal
of Financial Economics 80, 309-349.
(s)
Hvidkjaer, S., 2006, A trade-based analysis of
momentum, Review of Financial Studies 19, 457-491.
(s)
Sagi, J. S., and M. S. Seasholes, 2007, Firm-specific attributes and the
cross-section of momentum, Journal of Financial Economics 84, 389-434.
(r) Asness, Clifford S., Tobias J. Moskowitz, and Lasse H. Pedersen, 2008, Value and Momentum Everywhere, Working Paper, University of Chicago.
(s) Chui, Andy C. W., Sheridan Titman, and K.C. John Wei, 2008, Individualism and Momentum around the World, Working Paper, University of Texas at Austin.
(s) Gutierrez, R. C.,
and E. K. Kelley, 2008, The long-lasting momentum in weekly returns, The
Journal of Finance 63, 415-447.
D. Earnings Momentum
(s) Chan, Louis K.C.,
Narasimhan Jegadeesh, and Josef Lakonishok, 1996, "Momentum
Strategies," Journal of Finance 51, 1681-1713.
(s)
(s) Graham, B., and D. Dodd,
1934, Security Analysis,
(s) DeBondt,
W. and R. Thaler, 1985, "Does the Stock Market Overreact?" Journal
of Finance 40, 793-805.
(s) DeBondt,
W. and R. Thaler, 1987, "Further Evidence of Investor Overreaction and
Stock Market Seasonality," Journal of Finance 42, 557-581.
(s) Chan, K.C., 1988, "On
the Contrarian Investment Strategy," Journal of Business 61,
147-163.
(s) Ball, R. and S. Kothari,
1989, "Nonstationary Expected Returns: Implications for Tests of Market
Efficiency and Serial Correlation in Returns," Journal of Financial
Economics 25, 51-74.
(s) Davis, J., 1994,
“The cross-section of realized stock returns: The pre-Compustat
evidence,” Journal of Finance 49, 1579-1593.
(r) Lakonishok, J., A. Shleifer and
R. Vishny, 1994, "Contrarian Investment, Extrapolation and Risk," Journal
of Finance 49, 1541-1578.
(s) Berk, J. B., 1995,
“A critique of size related anomalies,” Review of Financial Studies
8, 275-286.
(s) Chan, L. K. C.,
(r) Fama, E. F., and K. R. French,
1995, “Size and book-to-market factors in earnings and returns,” Journal
of Finance 50, 131-155.
(s) Haugen, R., 1995,
“The new finance: The case against efficient markets,” (Prentice
Hall, Englewood Cliffs,
(s) Kothari, S. P., J.
Shanken, and R. G. Sloan, 1995, “Another look at the cross-section of
expected stock returns,” Journal of Finance 50, 185-224.
(s) Fama, E. and K. French,
1996, "Multifactor Explanations of Asset Pricing Anomalies," Journal
of Finance 51, 55-83.
(s) La Porta,
R., 1996, “Expectations and the cross-section of stock returns,” Journal
of Finance 51, 1715-1742.
(r) Daniel, K., and S. Titman, 1997,
“Evidence on the characteristics of cross-sectional variation in stock
returns,” Journal of Finance 52, 1-33.
(s) La Porta,
R., J. Lakonishok, A. Shleifer, and R. Vishny, 1997, “Good news for value
stocks: further evidence on market efficiency,” Journal of Finance
52, 859-874.
(s) Loughran, T., 1997,
“Book-to-market across firm size, exchange, and seasonality: Is there an
effect?” Journal of Financial and Quantitative Analysis 32,
249-268.
(s) Berk, Jonathan B., 1998, “Sorting
out sorts,” Journal of Finance 55, 407-427.
(s) Davis, J., E. F. Fama, and
K. R. French, 2000, “Characteristics, covariances, and average returns:
1929-1997,” Journal of Finance 55, 389.
(r)
(r) Daniel, K., and S.
Titman, 2006, “Testing
factor-model explanations of market anomalies”, Working Paper,
(r) Lewellen, Jonathan, Stefan Nagel
and Jay Shanken, 2006, “A
Skeptical Appraisal of Asset-Pricing Tests,” Unpublished Working
Paper,
F.
Post-earnings Announcement Drift
(r) Ball, Ray, and Philip Brown,
1968, "An
empirical evaluation of accounting income numbers," Journal of
Accounting Research Autumn, 1-48.
(r) Bernard, Victor and Jacob K.
Thomas, 1989, "Post-earnings-announcement
drift: delayed price response or risk premium?" Journal of
Accounting Research 27, 1-36.
(s) Abarbanell,
Jeffery S. and Victor L. Bernard, 1992, "Tests of
Analysts' Overreaction/Underreaction to Earnings Information as an Explanation
for Anomalous Stock Price Behavior," Journal of Finance 47,
1181-1207.
(s)
A) Mostly Theoretical
(s) Black, Fisher, 1986, Noise,
Journal of Finance 41, 529-543.
(s) DeLong,
J. Bradford, Andrei Shleifer, Lawrence H. Summers, and Robert Waldmann,
(s) DeLong,
J. Bradford, Andrei Shleifer, Lawrence H. Summers, and Robert Waldmann, 1990b,
"Positive feedback investment strategies and destabilizing rational
speculation," Journal of Finance 45, 379-395.
(s) Scharfstein, David S., and
Jeremy C. Stein, 1990, "Herd behavior and investment," American
Economic Review 80, 465-479.
(s) Froot,
Kenneth A., David S. Scharfstein, and Jeremy C. Stein, 1992, "Herd on the
street: informational inefficiencies in a market with short-term
speculation," Journal of Finance 47, 1461-1484.
(s) Benartzi, S. and R. H.
Thaler, 1995, “Myopic loss aversion and the equity premium puzzle,”
Quarterly Journal of Economics 110, 73-92.
(r) Shleifer, Andrei, and Robert W.
Vishny, 1997, “The
Limits of Arbitrage,” Journal of Finance, 52, 35 -55.
(s) Barberis, N., A. Shleifer,
and R. Vishny, 1998, “A model of investor sentiment,” Journal of
Financial Economics 49, 307-343.
(r) Daniel, K., D. Hirshleirfer, and A. Subrahmanyam, 1998, “Investor
Psychology and Security Market Under- and Overreactions,” Journal
of Finance 53, 1839-1885.
(r) Hong, Harrison, and Jeremy C.
Stein, 1999, "A
Unified Theory of Underreaction, Momentum Trading and Overreaction in Asset
Markets", Journal of Finance 54, 2143-2184.
(s) Shleifer, Andrei, 2000, Inefficient Markets
- An Introduction to Behavioral Finance,
(s) Hirshleifer, David, 2001, Investor Psychology and Asset Pricing, Journal of Finance 56, 1533-1597.
(s) Barberis, Nicholas, and Andrei Shleifer, 2003,
“Style
Investing,” Journal of Financial Economics, 68,
161-199.
(s) Barberis, N. and Richard Thaler, 2003, "A Survey of
Behavioral Finance", in the Handbook of the
Economics of Finance.
(s) Shiller, Robert J., 2003, “From
Efficient Markets Theory to Behavioral Finance,” Journal of Economic
Perspectives, 17, 83-104.
(s) Grinblatt, M., and M. Keloharju, 2006, “Sensation
seeking, overconfidence, and trading activity”, Working Paper, UCLA.
(s) Shleifer, Andrei, 1986, Do
Demand Curves for Stocks Slope Down? The Journal of Finance 41,
579-590.
(s) Odean, Terrance, 1998, Are
investors reluctant to realize their losses?, Journal of Finance 53,
1775-1798.
(r) Odean, Terrance, 1999, "Do
Investors Trade Too Much?", American
Economic Review 89, 1279-1298.
(s) Barber, Brad M., and
Terrance Odean, 2000, Trading is hazardous to your wealth: The common stock
investment performance of individual investors, Journal of Finance 55,
773-806.
(s) Hong,
(s) Hong, Harrison and Jeremy
Stein, 2003, "Differences
of Opinion, Short-Sales Constraints and Market Crashes," Review of
Financial Studies 16,487-525.
(s) Odean, Terrance, Brad
Barber and Ning Zhu, 2003, Systematic
Noise, Working Paper, UC Berkley.
(s) Wurgler, Jeffrey and
Malcolm Baker, 2003, "Investor
sentiment and the cross-section of stock returns," Journal of
Finance 61, 1645-1680.
(s) Hong, Harrison, Jeffrey Kubik, and Jeremy Stein, 2004 "Social Interaction
and Stock Market Participation," Journal of Finance 59,
137-163.
(r) Barberis, Nicholas, Andrei
Shleifer, and Jeffery Wurgler, 2005, Comovement,
Journal of Financial Economics.
(s) Frazzini,
Andrea, 2006, "The Disposition Effect and Under-Reaction to News," Journal
of Finance 61, 2017-2046.
(s) Odean, Terrance, Brad
Barber and Ning Zhu, 2006,
Do Noise Traders Move Markets?, Working paper, UC Berkley.
(s) Barber, Brad M., and
Terrance Odean, 2008, “All
that glitters: The effect of attention and news on the buying behavior of
individual and institutional investors”, Review Financial Studies
21, 785-818.
(s) Kumar, Alok, 2008, Dynamic Style
Preferences of Individual Investors and Stock Returns, Forthcoming, Journal of Financial and Quantitative
Analysis.
(r) Ron
Kaniel, Gideon Saar Sheridan Titman, 2008, “Individual
investor trading and stock returns”, The Journal of Finance
63, 273-310.
(r) Kumar, Alok, 2009, Who Gambles in the Stock Market?, Forthcoming, Journal of Finance.
B.1. Bubble Theory
(s) Friedman,
(s) Fama, Eugene F., 1965, “The
Behavior of Stock-Market Prices,” Journal of Business, 38,
34-105.
(s)Garber, Peter M., 1989, “Tulipmania,”
Journal of Political Economy, 97, 535-560.
(s) DeLong,
J. Bradford, Andrei Shleifer,
(s) DeLong,
J. Bradford, Andrei Shleifer,
(s)
(s) Shiller, Robert J.,
(s) Brunnermeier, Marcus K.,
2001, “Asset
Pricing under Asymmetric Information: Bubbles, Crashes, Technical Analysis and
Herding,”
(s) Abreu,
Dilip, and Marcus K. Brunnermeier, 2002, “Synchronization Risk and
Delayed Arbitrage,” Journal of Financial Economics, 66,
341-360.
(s) Abreu,
Dilip, and Marcus K. Brunnermeier, 2003, “Bubbles
and Crashes,” Econometrica, 71, 173-204.
(s) De Bondt, Werner, 2003, “Bubble Psychology,"
in W.C. Hunter, G.G. Kaufman and M. Pomerleano
(eds.), Asset Price Bubbles, MIT Press, Cambridge, MA.
(s) LeRoy,
Stephen, 2004, “Rational
Exuberance,” Journal of Economic Literature, 42, 783-804.
(s) Harrison
Hong, Jos Scheinkman Wei Xiong, 2006, “Asset float and
speculative bubbles”, The Journal of Finance 61, 1073-1117.
B.2. Bubble Empirical
(s) Ofek, Eli, and Matthew
Richardson, 2002, “The
Valuation and Market Rationality of Internet Stock Prices,”
(s) Ofek, Eli, and Matthew
Richardson, 2003, “DotCom
Mania: The Rise and Fall of Internet Stock
Prices,” Journal of Finance, 58, 1113-1137.
(s) Brunnermeier, M. K., and
(s) Battalio, Robert H., and
Paul H. Schultz, 2005, “Options
and the Bubble,” AFA 2005
(s)
Pastor, Lubos, and Pietro Veronesi, 2006, “Was
there a Nasdaq bubble in the late 1990s?”, Journal
of Financial Economics 81, 61-100.
(s) Goetzmann, William N. and
(r)
B.3. Seasonal Effects
(s) Kamstra,
Mark, Lisa Kramer and Maurice Levi, 2003, Winter Blues: A SAD
Stock Market Cycle, American Economic Review 93(1), 324-343.
(s) Kelly, Patrick J. and J.
Felix Meschke, 2003, "Sentiment and
Stock Returns: The Sad Anomaly Revisited," Working Paper,
A. International Asset
Pricing
(s) Stulz, R., 1981, "A
Model of International Asset Pricing," Journal of Financial Economics 9,
383-406.
(s) Adler, M. and B. Dumas,
1983, “International portfolio selection and corporation finance: A
synthesis,” Journal of Finance 38, 925-984.
(s)
(s) Jorion,
P., 1991, “The pricing of exchange rate risk in the stock market,” Journal
of Financial and Quantitative Analysis 26, 363-76.
(s) Bekaert, G., and R. Hodrick, 1992, "Characterizing Predictable Components
in Excess Returns on Equity and Foreign Exchange Markets," Journal of
Finance 47, 467-509.
(s) Chan, K.C., G. A. Karolyi
and R. Stulz, 1992, "Global Financial Markets and the Risk Premium on
(s) Ferson, W. and C. Harvey,
1993, "The Risk and Predictability of International Equity Returns," Review
of Financial Studies 6, 527-565.
(s) Bekaert, G. and C. Harvey,
1995, "Time-varying World Market Integration," Journal of Finance
50, 403-443.
(s) Dumas, A. and B. Solnik,
1995, "The World Price of Exchange Rate Risk," Journal of Finance
50, 445-479.
(s) Stulz, R., 1995,
"International Portfolio Choice and Asset Pricing: An Integrative
Survey," in Jarrow, R., V. Maksimovic, W. Ziemba, eds., Finance (Volume 9, Handbooks in
Operations Research and Management Science), Elsevier Science, Amsterdam.
(s) Bekaert, G. and M. Urias, 1996, "Diversification, Integration and
Emerging Market Closed End Funds" Journal of Finance 51, 835-869.
(s) Solnik, B., 1996, International
Investments, 3rd Edition.
(s) Bekaert, G. and C. Harvey,
1997, "Emerging Equity Market Volatility" Journal of Financial
Economics 43, 29-77.
(s) DeSantis,
G. and B. Gerard, 1997 "International Asset Pricing and Portfolio
Diversification with Time-varying Risk," Journal of Finance 52,
1881-1912.
(s) DeSantis,
G. and B. Gerard, 1998, "How Big is the Premium for Currency Risk?" Journal
of Financial Economics 49, 375-411.
(s) Fama, E. F., and K. R.
French, 1998, “Value versus growth: The international evidence,” Journal
of Finance, 53, 1975-1999.
(s) Errunza,
V., K. Hogan and M. Hung, 1999, "Can the
gains for International Diversification be Achieved
Without Trading Abroad?" Journal of Finance 54, 2075-2107.
(s)
(s) Karolyi, G. Andrew, and
Rene M. Stulz, 2003, Are financial assets priced locally or globally? In:
George M. Constantinides, Milton Harris and Rene Stulz (eds.) Handbook of the Economics of Finance,
Chapter 16. (also NBER Working Paper No. 8994.)
(s) Bekaert, Geert,
(s) Bekaert, Geert, Chris Lundblad, and Stephan Siegel, 2007, "Growth Opportunities and Market Integration," Journal of Finance 62, 1081-1138.
(s) Adler, M. and B. Dumas,
1984, “Exposure to currency risk: Definition and measurement,” Financial
Management 13, 41-50.
(s) Jorion,
P., 1990, “The exchange rate exposure of
(s) Bodnar,
G., and Gentry, W., 1993, Exchange rate exposure and industry characteristics:
Evidence from
(s) Bartov E., and G. Bodnar, 1994, “Firm valuation, earnings expectations
and the exchange-rate effect, Journal of Finance 49, 1755-1785.
(s) Allayannis,
G.,
(s) Allayannis,
G., 1996b, “Time variation of exchange rate exposure: An industry
analysis,”
(s) Chow, E., W. Lee, and M. Solt, 1997, “The Exchange-Rate Risk Exposure of Asset
Returns,” Journal of Business 70, 107-123.
(s) Simkins,
B. J. and P. Laux, 1998, “Derivatives use and
the exchange rate risk of large
(s) He, J. and L. Ng, 1998,
“Foreign Exchange Exposure, Risk, and the Japanese Stock
Market” Journal of Finance, 53, 733-753.
(s) Williamson, R., 2000,
Exchange rate exposure and competition: Evidence from the automotive industry, Journal
of Financial Economics, forthcoming.
(s) Doidge,
Craig, John M. Griffin, Rohan Williamson, 2006,
"Measuring
the Economic Importance of Exchange Rate Exposure”, Journal of Empirical Finance 13,
550-576.
(s)
C.
Other International Finance Issues-- Linkages, Correlations, etc.
(s) Jorion,
P. and E. Schwartz, 1986, "Integration vs
Segmentation in the Canadian Stock Market," Journal of Finance 41,
603-614.
(s) Hamao Y., R. Masulis and
V. Ng, 1990, “Correlations in Price Changes and Volatility across
International Stock Markets,” Review of Financial Studies 3, 281-307. (s)
Heston, S. and G. Rouwenhorst, 1994, "Does
Industrial Structure Explain the Benefits of International Diversification?"
Journal of Financial Economics 36, 3-27.
(s) Roll, R., 1992,
"Industrial Structure and the Comparative Behavior of International Stock
Market Indexes," Journal of Finance 47, 3-42.
(s) King, M., E. Sentana and
(s) Longin, F. and B. Solnik,
1995, “Is the correlation in international equity returns constant:
1960-1990?” Journal of International Money and Finance 14, 3-26.
(s) Karolyi, G. A. and R. Stulz,
1996, "Why do Markets Move Together? An Investigation of the U.S.-Japanese
Stock Return Comovements" Journal of Finance 51, 951-986.
(s) Karoli,
G. Andrew, 1998 "Another
look at the Role of the Industrial Structure of Markets for International
Diversification Strategies", Journal of Financial Economics 50,
351-373.
(s) Choe, Hyuk, Bong-Chan Kho, and Rene M. Stulz,
1999, “Do
Foreign Investors Destabilize Stock Markets? The Korean Experience in
1997,” Journal of Financial Economics, 54, 227-264.
D.
Capital Flows and Contagion
(s) Bohn, Henning, and Linda Tesar, 1996,
(s) Brennan, M. J., and Cao,
H. H., 1997, International portfolio investment flows, Journal of Finance
52, 1851-1880.
(s) Bailey, Warren, Kalok Chan, and Y. Peter Chung, 1998, "Depository
receipts, country funds, and the Peso crash: The intraday evidence," Journal
of Finance 55, 2693-2717.
(s) Bekaert, Geert, and
Campbell R. Harvey, 1999, Capital flows and the behavior of emerging market
equity returns, Unpublished working paper,
(s) Choe, Hyuk, Bong-Chan Kho,
and Rene M. Stulz, 1999, Do foreign investors destabilize stock markets? The
Korean experience in 1997, Journal of Financial Economics 54, 227-264.
(s) Karolyi, G. Andrew, 1999, "Did
the Asian financial crisis scare foreign investors out of Japan?", Pacific-Basin Finance Journal 10, 411-442.
(r) Stulz, Rene M.,
1999, "International
portfolio flows and security markets," Unpublished working paper, Dice
Center for Financial Economics, The Ohio State University, Columbus, OH.
(s) Bekaert, Geert, and
Campbell R. Harvey, 2000, "Foreign
speculators and emerging equity markets," Journal of Finance
55, 565-613. (s) Seasholes, Mark S., 2000, "Smart foreign traders in
emerging markets," Unpublished Working paper,
(s) Choe, Hyuk, Bong-Chan Kho,
and Rene M. Stulz, 2001, "Do domestic investors have more valuable
information about individual stocks than foreign investors?" Working
paper,
(s) Froot,
Kenneth A., and Tarun Ramadorai, 2001, "The
information content of international portfolio flows," Working paper,
(s) Froot,
Kenneth A., Paul G. J. O'Connell, and Mark S. Seasholes, 2001, The portfolio
flows of international investors, Journal of Financial Economics 59,
151-193.
(s) Froot, Kenneth A., and Tarun Ramadorai, 2002, Currency Returns, Institutional
Investor Flows, and Exchange Rate Fundamentals, NBER Working paper 9101.
(s)
E. Other
(s) Roll, R., 1988, R-squared, Journal of
Finance 43, 541-566.
(s) Levine, Ross, 1997, Financial development and
economic growth: Views and agenda, Journal of Economic Literature 35,
688-726.
(r) Morck,
Randall, Bernard Yeung and Wayne Yu. 2000. The Information Content
of Stock Markets: Why Do Emerging Markets Have Synchronous Stock Price
Movements? Journal of Financial Economics 58(1) Oct. 215-260.
(s) Doidge,
Craig, G. Andrew Karolyi, and Rene Stulz, 2004, "Why Are Foreign Firms that List in the U.S. Worth More?" Journal of Financial
Economics, forthcoming.
(r) Mian,
Artif and Asim Ijaz Khwaja,
2005 "Unchecked
Intermediaries: Price Manipulation in an Emerging Stock Market,"
forthcoming in the Journal of Financial Economics.
(s) Beck, Thorsten, Asli Demirguc-Kunt, and Vojislav Maksimovic, 2005, “Financial and
legal constraints to growth: Does firm size matter?”, The Journal of Finance 60, 137-177.
(s) Beck, Thorsten, 2008, "The Econometrics of Finance and Growth", Palgrave Handbook of Econometrics, Vol. 2, Forthcoming.
(s) Pukthuanthong-Le, K., and R. Roll, 2008, “Global Market Integration: An Alternative Measure and its Application”, Forthcoming, Journal of Financial Economics.
(s) Thorsten Beck, Asli Demirguc-Kunt, and Luc Laeven, Ross Levine, 2008, “Finance, Firm Size, and Growth”, Forthcoming, Journal of Money, Credit and Banking.
(r) Bekaert, Geert, Campbell Harvey, and Chris Lundblad, 2008, "What Segments Equity Markets?", Working Paper, Columbia University.
IX. Investors
and Mutual Funds
(s) Lakonishok, Josef, Andrei
Shleifer, and Robert W. Vishny, 1992, "The impact of institutional trading
on stock prices," Journal of Financial Economics 32, 23-43.
(s)
Barclay, Michael J., and Jerold B. Warner, 1993, "Stealth
trading and volatility: Which trades move prices?",
Journal of Financial Economics 34, 281-305.
(s) Chan,
Louis K.C., and Josef Lakonishok, 1995, "The
behavior of stock prices around institutional trades," Journal of
Finance 50, 1147-1174.
(s)
Sias, Richard W., and Laura T. Starks, 1997, "Return
autocorrelation and institutional investors," Journal of Financial
Economics 46, 103 – 131.
B. Flows
(s) Warther,
Vincent A., 1995, “Aggregate
Mutual Fund Flows and Stock Returns,” Journal of Financial
Economics, 39, 209-235.
(s) Falkenstein, E. G., 1996, “Preferences
for Stock Characteristics as Revealed by Mutual Fund Portfolio Holdings,”
Journal of Finance 51, 111-135.
(s) Edelen,
Roger M., 1999, Investor flows and the assessed performance of open-end mutual
funds, Journal of Financial Economics 53, 439-466.
(s) Edelen,
Roger M., and Jerold B. Warner, 2001, "Aggregate
price effects of institutional trading: A study of mutual fund flow and market
returns," Journal of Financial Economics 59, 195-220.
(s) Gompers, Paul A. and Andrew
Metrick, 2001, "Institutional
Investors and Equity Prices," The Quarterly Journal of Economics February,
229-259.
(s) Greene, Jason T., and
Charles W. Hodges, 2002, “The
Dilution Impact of Daily Fund Flows on Open-end Mutual Funds,” Journal
of Financial Economics, 65, 131-158.
(s) Bennett, J. A., R. W.
Sias, and L T. Starks, 2003, “Greener
Pastures and the Impact of Dynamic Institutional Preferences,” Review of Financial Studies 16, 1203-1238.
(s) Goetzmann, William N., and
Massimo
Massa , 2003, Daily Momentum
And Contrarian Behavior Of Index Fund Investors, Working paper,
(s) Goetzmann, William N., and
Massimo
Massa , 2003, "Disposition Matters: Volume, Volatility and
Price Impact of a Behavioral Bias," Working paper,
(s) Goetzmann, William N. , Massimo
Massa, and K. Geert
Rouwenhorst , 2003, Behavioral
Factors in Mutual Fund Flows, Working paper,
(s) Goetzmann, William N., and
Massimo
Massa , 2003, "Index Funds
and Stock Market Growth," Journal of Business 76, 1-28.
(s)
(s) Frazzini,
Andrea and Owen Lamont, 2006, “Dumb Money: Mutual Fund Flows and Return Predictability”,
Working Paper,
(s) Coval, Joshua, and
Erik Stafford, 2007, “Asset
fire sales (and purchases) in equity markets”, Journal of Financial
Economics 86, 479-512.
C.
Performance Evaluation and Mutual funds
(s) Treynor,
J., 1965, "How to Rate Management of Investment Funds," Harvard
Business Review 43, 63-75.
(s) Sharpe, W., 1966,
"Mutual Fund Performance," Journal of Business 39, 119-138.
(s) Treynor,
J. and F. Mazuy, 1966, "Can Mutual Funds
Outguess the Market?" Harvard Business Review 44, 131-136.
(s) Roll, R., 1978,
"Ambiguity When Performance is Measured by the Securities Market
Line," Journal of Finance 33, 1051-1069.
(s) Mayers,
D. and E. Rice, 1979, "Measuring Portfolio Performance and the Empirical
Content of Asset Pricing Models," Journal of Financial Economics,
7, 3-29.
(s) Roll, R., 1979,
"Reply to Mayers and Rice," Journal of
Financial Economics 7, 391-400.
(s) Henriksson,
R. and R. Merton, 1981, "On Market Timing and Investment Performance II:
Statistical Procedures for Evaluating Forecasting Skills," Journal of
Business 54, 513-533.
(s) Jobson, J. and R. Korkie,
1981, "Performance Hypothesis Testing with the Sharpe and Treynor Measures," Journal of Finance 36,
889-908.
(s) Merton, R., 1981, "On
Market Timing and Investment Performance I: An Equilibrium Theory of Value for
Market Forecasts," Journal of Business 54, 363-406.
(s) Admati,
A. and S. Ross, 1985, "Measuring Investment Performance in a Rational
Expectations Equilibrium Model," Journal of Business 58, 1-26.
(s) Dybvig,
P. and S. Ross, 1985, "Differential Information and Performance
Measurement Using a Security Market Line," Journal of Finance 40,
383-399.
(s) Admati,
A., Bhattacharya, S., Pfleiderer, P. and S. Ross,
1986, "On Timing and Selectivity," Journal of Finance 41,
715-730.
(s) Connor, G. and R.
Korajczyk, 1986, "Performance Measurement with the Arbitrage Pricing
Theory: A New Framework for Analysis," Journal of Financial Economics
15, 373-394.
(s) Cumby, R. and D. Modest,
1987, "Testing for Market Timing Ability: A Framework for Forecast
Evaluation," Journal of Financial Economics 19, 169-190.
(s) Grinblatt, M. and S.
Titman, 1989, "Mutual Fund Performance: An Analysis of Quarterly Portfolio
Holdings," Journal of Business 62, 393-416.
(s) Grinblatt, M. and S.
Titman, 1989, "Portfolio Performance Evaluation: Old Issues and New
Insights," Review of Financial Studies 2, 393-422.
(s) Brown, S., Goetzmann, W.,
Ibbotson, R. and S. Ross, 1992, "Survivorship Bias in Performance
Studies," Review of Financial Studies 5, 553-580.
(s) Grinblatt, M. and S.
Titman, 1993, "Performance Measurement without Benchmarks: An Examination
of Mutual Fund Returns," Journal of Business 66, 47-68.
(s) Hendricks, D., J. Patel
and R. Zeckhauser, 1993, "Hot Hands in Mutual
Funds: Short-run Persistence of Relative Performance, 1974-1988" Journal
of Finance 48, 93-130.
(s) Ferson, W. and R. Schadt, 1995, "Measuring Fund Strategy and Performance
in Changing Economic Conditions," Journal of Finance 51, 425-461.
(s) Grinblatt, Mark, Sheridan
Titman, and Russ Wermers, 1995, Momentum investment
strategies, portfolio performance, and herding: A study of mutual fund behavior,
American Economic Review 85, 1088-1105.
(s) Elton, E., M. Gruber and
C. Blake, 1996, "Survivorship Bias and Mutual Fund Performance" Review
of Financial Studies 9, 1097-1120.
(r)
(s) Christopherson,
J., W. Ferson and D. Glassman, 1998, "Conditioning Manager Alphas on
Economic Information: Another Look at the Persistence of Performance" Review
of Financial Studies 11, 111-142.
(s) Chen, Hsiu-Lang, Narasimhan Jegadeesh, and Russ Wermers, 2000, The value of active mutual fund management: An examination of the stockholdings and trades of fund managers, Journal of Finance and Quantitative Analysis 35, 343-368.
(s) Grinblatt, Mark, and Matti Keloharju, 2000, The investment behavior and performance of various investor types: A study of Finland’s unique data set, Journal of Financial Economics 55, 43-67.
(s) Wermers, Russ, 2000, “Mutual Fund Performance: An Empirical Decomposition into Stock-Picking Talent, Style, Transaction Costs, and Expenses,” Journal of Finance, 55, 1655 – 1696.
(s)
Chen, J., H. Hong, and J. Stein, 2002, “Breadth
of Ownership and Stock Returns,” Journal of Financial Economics
66, 171-205.
(s) Pastor, Lubos, and Robert F.
Stambaugh, 2002, Mutual
fund performance and seemingly unrelated assets, Journal of Financial
Economics 63, 315--349.
(s) Pastor, Lubos, and Robert F.
Stambaugh, Investing in equity mutual funds, 2002, Journal of Financial
Economics 63, 351-380.
(s) Geczy,
Christopher C., Robert F. Stambaugh, and David Levin, 2003, Investing in
Socially Responsible Mutual Funds, Working paper,
(s) Wermers, R., 2003, “Is
Money Really ‘Smart’? New Evidence on the Relation Between Mutual
Fund Flows, Manager Behavior, and Performance Persistence,” Unpublished
paper,
(s) Cohen, Randolph, Joshua Coval, and
Luboš Pástor. 2005 "Judging Fund
Managers by the Company They Keep." Journal of Finance 60,
1057-1096.
(r)
Cremers, K. J. Martijn, and A. Petajisto, 2006, “How
Active is Your Fund Manager? A New Measure that Predicts Performance,”
Forthcoming, Review of Financial Studies.
(s) Cohen, Lauren, Andrea Frazzini, and Christopher J. Malloy, 2008, "The Small World of Investing: Board Connections and Mutual Fund Returns", Journal of Political Economy 116 , 951-979.
(r) Cremers, Martijn, Antti
Petajisto, and Eric Zitzewitz, 2008, “Should
Benchmark Indices Have Alpha? Revisiting Performance Evaluation”,
Working Paper,
(s)
Petajisto, A., K. J. M. Cremers, and E. W. Zitzewitz,
2008, “Should
benchmark indices have alpha? Revisiting performance evaluation”,
Working Papers,
and individual investors
(s) Coval, Joshua D., David
Hirshleifer, and Tyler Shumway, 2005, "Can Individual
Investors Beat the Market?", Working Paper,
(D) Hedge Funds
(s) Fung, W., and D. A.
Hsieh, 1997, “Empirical
Characteristics of Dynamic Trading Strategies: The Case of Hedge Funds,”
Review of Financial Studies 10, 275-302.
(s) Ackermann, C., R. McEnally, and D. Ravenscraft,
1999, “The
Performance of Hedge Funds: Risk, Return, and Incentives,” Journal
of Finance 54, 833-874.
(s) Brown, S. J., W. N. Goetzmann,
and R. G. Ibbotson, 1999, “Offshore
Hedge Funds: Survival and Performance, 1989-95,” Journal of
Business 72, 91-117.
(s) Agarwal,
V., and N. Y. Naik, 2000, “Multi-Period
Performance Persistence Analysis of Hedge Funds," Journal of
Financial and Quantitative Analysis 35, 327-342
(s) Fung, W., and D. A.
Hsieh, 2000, “Performance
Characteristics of Hedge Funds and Commodity Funds: Natural vs. Spurious
Biases,” Journal of Financial and Quantitative Analysis 35,
291-307.
(s) Liang, B., 2000, “Hedge
Funds: The Living and the Dead,” Journal of Financial and
Quantitative Analysis 35, 309-326.
(s) Asness,
C., R. Krail, J. Liew,
2001, “Do
Hedge Funds Hedge: Be cautious in analyzing monthly returns,” Journal
of Portfolio Management 28, 6-19.
(s) Fung, W., and D. A.
Hsieh, 2001, “The Risk in Hedge
Fund Strategies: Theory and Evidence from Trend Followers,” Review
of Financial Studies 14, 313-341.
(s) Brown,
Stephen J. and William N. Goetzmann, 2002, Hedge Funds
With Style
(s) Goetzmann, William N. , Roger G.
Ibbotson and Stephen J.
Brown, 2002, Offshore Hedge
Funds: Survival & Performance 1989-1995
(s) Goetzmann William N., Stephen J.
Brown and James M.
Park , 2002, Hedge Funds and
the Asian Currency Crisis of 1997
(s) Weisman, A. B.,
2002, “Informationless
Investing and Hedge Fund Performance Measurement Bias,” Journal of
Portfolio Management 28, 80-91.
(s) Liang, B., 2003,
“The Accuracy of Hedge Fund Returns: Auditing Makes a Real
Difference,” Journal of Portfolio Management 29, 111-122.
(s) Amin, G. S., and H.
M. Kat, 2003, “Hedge
Fund Performance 1990-2000: Do the ‘Money Machines’ Really Add
Value?” Journal of Financial and Quantitative Analysis 38,
251-274.
(s) Agarwal,
V., and N. Y. Naik, 2004, “Risks and
Portfolio Decisions Involving Hedge Funds,” Review of Financial
Studies 17, 63-98.
(s) Fung, W., and D. A.
Hsieh, 2004, “Hedge
Fund Benchmarks: A Risk-Based Approach,” Financial Analysts
Journal 60, 65,80.
(s) Getmansky,
M., A. W. Lo, and
(s) Brown, S. J., D.R.
Gallagher, O. W. Steenbeek, and P. L. Swan, 2005, “Double or
Nothing: Patterns of Equity Fund Holdings and Transactions,”
unpublished paper, NYU.
(s) Agarwal,
V., N. M. Boyson, and N. Y. Naik,
2006, “Poor
Man’s Hedge Funds? Performance and Risk-taking of Hedged Mutual
Funds,” unpublished paper,
(s) Agarwal,
V., N. D. Daniel, and N. Y. Naik, 2006, “Why is
Santa so Kind to Hedge Funds? The December Return Puzzle!”
unpublished paper,
(s) Amin, G.S., and H. M.
Kat, 2006, “Superstars
or Average Joes? A Replication-based Performance Evaluation of 1917
Individual Hedge Funds,” unpublished paper, City University London.
(s) Bollen, N., and V. Krepley, 2006, “A
Screen for Fraudulent Return Smoothing in the Hedge Fund Industry,”
unpublished paper,
(s) Chen, Y., and B. Liang,
2006, “Do
Market Timing Hedge Funds Time the Market?” unpublished paper, UMass Amherst.
(s) Fung, W., D. A.
Hsieh, N. Y. Naik, and T. Ramadorai,
2006, “Hedge
Funds: Performance, Risk, and Capital Formation,” unpublished paper,
(s) Kosowski,
R., N. Y. Naik, and M. Teo,
2006, “Do
Hedge Funds Deliver Alpha? A Bayesian and Bootstrap Analysis,”
forthcoming in Journal of Financial Economics.
(s) Tiu,
C. I., 2006, “Systematic Risk in Hedge Funds,” unpublished
dissertation,
(s) Chen, Joseph, Samuel Hanson, Harrison G. Hong, and Jeremy C. Stein, 2007, "Do Hedge Fund Profit from Mutual Fund Distress", Working Paper, University of California - Davis.
(r) Griffin, John M., and Jin Xu, 2008, “How Smart are the Smart Guys? A Unique View from Hedge Fund Stock Holdings”, Forthcoming, The Review of Financial Studies.
(r) Khandani,
Amir, and Andrew W. Lo,
“What
Happened to the Quants in August 2007?: Evidence from
Factors and Transactions Data”, Working Paper, MIT.
(E) Short-term behavior and
Herding
(s) Grinblatt, M., S. Titman,
and R. Wermers, 1995, “Momentum
Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual
Fund Behavior,” American Economic Review 85, 1088‑1105.
(s) Nofsinger, John R., and Richard W. Sias, 1999,
“Herding
and Feedback Trading by Institutional and Individual Investors,” Journal
of Finance, 54, 2263‑2295.
(r) Wermers, R., 1999, "Mutual
Fund Herding and the Impact on Stock Prices,” Journal of Finance 54,
581-622.
(s)
X. Market Microstructure.
(r) Campbell, J., A. Lo and C.
MacKinlay, "Chapter 3: Market Microstructure" in The Econometrics
of Financial Markets.
A. Classics
(s) Demsetz, H. 1968 “The Cost of Transacting”, Quarterly
Journal of Economics, 82, 33-53.
(s) Ho, T., and H. Stoll, 1980
“On Dealer Markets Under Competition” The Journal of Finance,
Vol. 35, 259-267.
(s) Glosten,
L. and P. Milgrom, 1985, “Bid, Ask, and Transaction Prices in a
Specialist Market with Heterogeneously Informed Traders”, Journal of
Financial Economics, 14, 71-100.
B. Institutional Aspects of
Market Structure
(s) Wood, R., McInish, T. and K. Ord, 1985,
"An Investigation of Transactions Data for NYSE Stocks," Journal
of Finance 40, 723-738.
(s) Cohen, K., Maier, S.,
Schwartz, R. and D. Whitcomb, 1986, The Microstructure of Securities Markets.
(s) Amihud,
Y. and H. Mendelson, 1987, "Trading Mechanisms
and Stock Returns: An Empirical Investigation," Journal of Finance
42, 533-553.
(s) Hasbrouck, J. and T. Ho,
1987, "Order Arrival, Quote Behavior, and the Return-Generating
Process," Journal of Finance 42, 1035-1048.
(s) Hasbrouck, J., 1988,
"Trades, Quotes, Inventories and Information," Journal of
Financial Economics 22, 229-252.
(s) Hasbrouck, J., 1991,
"Measuring the Information Content of Stock Trades," Journal of
Finance 46, 176-208.
(s) Lee, C. and M. Ready,
1991, "Inferring Trade Direction from Intraday Data," Journal of
Finance 46, 733-746.
(s) Madhavan,
A. and S. Smidt, 1991, "A Bayesian Model of
Intraday Specialist Pricing," Journal of Financial Economics 30,
99-134.
(s) Foster, D. and
(s) Christie, W. and P.
Schultz, 1994, "Why do NASDAQ Market-makers Avoid Odd-Eighth Quotes?"
Journal of Finance 49, 1813-1840.
(s) Journal of Financial
Economics Symposium on Dealer Markets, July 1997.
(s) Madhavan,
A., M. Richardson and M. Roomans, 1997, "Why Do
Security Prices Change? A Transaction-Level Analysis of NYSE Stocks" Review
of Financial Studies 10, 1035-1064.
(s) Harris, Jeffrey H., and Paul H. Schultz, 1998,
“The Trading
Profits of SOES Bandits,” Journal of Financial Economics, 50,
39-62.
C. Non-Synchronous Trading
and Measurement Biases
(s) Fisher, L., 1966,
"Some New Stock Market Indexes," Journal of Business 39,
191-225.
(s) Scholes, M. and J.
Williams, 1977, "Estimating Beta From Non-Synchronous Data," Journal
of Financial Economics 5, 309-327.
(s) Dimson, E., 1979,
"Risk Measurement when Shares are Subject to Infrequent Trading," Journal
of Financial Economics 7, 197-226.
(s) Blume, M. and R.
Stambaugh, 1983, "Biases in Computed Returns: An Application to the Size
Effect," Journal of Financial Economics 12, 387-404.
(s) Fowler, D. and C. Rorke, 1983, "Risk Measurement when Shares are Subject
to Infrequent Trading: Comment," Journal of Financial Economics 12,
279-283.
(s) Roll, R., 1983, "On
Computing Mean Returns and the Small Firm Premium," Journal of
Financial Economics 12, 371-387.
(s) Ball, C., 1988,
"Estimation Bias Induced by Discrete Security Prices," Journal of
Finance 43, 841-865.
(s) Lo, A. and C. MacKinlay,
1990, "An Econometric Analysis of Non-Synchronous Trading," Journal
of Econometrics 45, 181-212.
D. Bid-Ask Spreads and
Price Discreteness
(s) Roll, R., 1984, "A
Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market,"
Journal of Finance 39, 1127-1139.
(s) Glosten,
L. and L. Harris, 1988, "Estimating the Components of the Bid/Ask
Spread," Journal of Financial Economics 21, 123-142.
(s) Harris, L., 1991,
"Stock Price Clustering and Discreteness," Review of Financial Studies
5, 389-415.
(s) Hausman, J., Lo, A. and C.
MacKinlay, 1991, "An Ordered Probit Analysis of Transaction Stock
Prices," Journal of Financial Economics 31, 319-379.
(s) George, T., G. Kaul and M. Nimalendran, 1991,
"Estimation of the Bid-Ask Spread and its Components: A New
Approach," Review of Financial Studies 4, 623-656.
(s) Huang, R. and H. Stoll,
1997 “The Components of the Bid-Ask Spread: A General Approach”, Review
of Financial Studies, 4, 995-1034.
(s) Bollen, N., T. Smith, and R.
Whaley, 2004, “Modeling the Bid-Ask Spread: Measuring the
Inventory-Holding Premium”, Journal of Financial Economics 72
97-141.
E. Price Discovery
(s) Hasbrouck, J.
“One Security, Many Markets: Determining the Contributions to Price
Discovery”, Journal of Finance, 1995.
(s) Chakravarty, S., H. Gulen,
and
(s) Hasbrouck, J., 2003 “Intraday Price Formation in
F. Market Design
(s) Barclay, M., W. Christie, J. Harris, E. Kandel and P. Schultz, 1999, “Effects
of Market Reform on the Trading Costs and Depths of Nasdaq Stocks”, Journal
of Finance 54, 1-34.
(s) Venkataraman, K., 2001, “Automated Versus
Floor Trading: An Analysis of Execution Costs on the
(s) Huang, R., 2002,
“The Quality of ECN and Nasdaq Market Maker Quotes”, Journal of
Finance.
G. Microstructure with
parts of Finance
(s) Easley, David, Soeren Hvidkjaer, and Maureen O'hara, 2002, "Is Information Risk
a Determinant of Asset Returns?" Journal of Finance 57,
2185-2221.
(s)
(s) Brockman, P., and D.
Chung, 2003, “Investor Protection and Firm Liquidity”, Journal
of Finance 58, 921-938.
(s) O'hara,
Maureen, 2003, Presidential
Address: Liquidity
and Price Discovery, Journal of Finance 58, 1335-1354.
(s) Easley, David, and Maureen
O'hara, 2004, Information and Cost of
Capital, Journal of Finance, forthcoming.
(s)
Market Frictions, Price Delay, and the Cross-Section of Expected Returns"
(with Kewei Hou), 2004,
forthcoming Review of Financial Studies.
H. Short-sales
(s) Diether,
K. B., K. Lee, and I. M. Werner, 2005,
“Short-Sale
Strategies and Return Predictability,”
Review of Financial Studies 22, 575-607.
(s) Boehmer, E., C. M.
Jones, and X. Zhang, 2008,
“Which
Shorts are Informed," Journal
of Finance 63, 491-527.
(s) De Bondt Werner, and
Richard H. Thaler, 1990, "Do
Security Analysts Overreact?" American Economic Review Papers and
Proceedings 80(2), 52-57.
(s) Hong,
Harrison, and Jeffrey D. Kubik, 2003, "Analyzing the
Analysts: Career Concerns and Biased Earnings Forecasts",
Journal of
Finance 58,
313-351.
XII. Volume/Volatility
(s) Gallant, A. Ronald, Peter
E. Rossi, and George Tauchen, 1992, Stock Prices and
Volume, RFS 5, 199-242.
(s) Brailsford,
Timothy J., 1994, The empirical relationship between trading volume, returns
and volatility, Working paper,
(s) Schwert, G. William, 1998,
"Stock Market
Volatility: Ten Years After the Crash," Brookings-Wharton Papers on
Financial Services I, 65-114.
(s) Lo, Andrew W., and Jiang Wang, 2000, "Trading Volume: Definitions, Data
Analysis, and Implications of Portfolio Theory," Review of Financial
Studies 13, 257-300.
(s) Campbell, Lettau, Malkiel, and Xu, 2001, "Have individual stocks
become more volatile?" Journal of Finance 56, 233-264.
(s) Llorente,
Guillermo, Roni Michaely,
Gideon Saar, and Jiang Wang, 2002, "Dynamic
Volume-Return Relation of Individual Stocks," Review of Financial
Studies 15, 1005-1047.
(s) Schwert, G. William, 2002,
"Stock Volatility in
the New Millennium: How Wacky is Nasdaq?" Journal
of Monetary Economics 49, 3-26.
(s) Lo, Andrew W., Harry Mamaysky,
and Jiang Wang, 2004, "Asset
prices and trading volume under fixed transaction costs," Journal
of Political Economy 112, 1054-1090.
XIII. Consumption and Production Based
Asset Pricing Models
(s) Campbell, J., A. Lo and C.
MacKinlay, 1993, "Chapter 8: Intertemporal Equilibrium Models" in The
Econometrics of Financial Markets.
A. Consumption Based Models
(s) Hansen, L. and K.
Singleton, 1982, "Generalized Instrumental Variables Estimation of
Nonlinear Rational Expectations Models," Econometrica 50,
1269-1286.
(s) Hansen, L. and K.
Singleton, 1983, "Stochastic Consumption, Risk Aversion, and the Temporal
Behavior of Asset Returns," Journal of Political Economy 91,
249-265.
(s) Brown, D. and M. Gibbons,
1985, "A Simple Econometric Approach for Utility-Based Asset Pricing
Models," Journal of Finance 40, 359-381.
(s) Grossman, S., A. Melino and R. Shiller, 1987, "Estimating the
Continuous Time Consumption Based Asset Pricing Model," Journal of Business
and Economic Statistics 5, 315-327.
(s) Breeden, D., Gibbons, M.
and R. Litzenberger, 1989, "Empirical Tests of the Consumption Oriented
CAPM", Journal of Finance 44, 231-262.
(s) Hansen, L. and R.
Jagannathan, 1991, "Implications of Security Market Data for Models of
Dynamic Economies," Journal of Political Economy 99, 225-262.
(s) Ferson, W. and C. Harvey,
1992, "Seasonality and Consumption-based Asset Pricing," Journal
of Finance 47, 511-552.
(s) Hansen, L. and R.
Jagannathan, 1992, "Assessing Specification Errors in Stochastic Discount
Factor Models," Journal of Finance 52, 557-590.
(s) Cecchetti,
S., P.S. Lam and N. Mark, 1994, "Testing Volatility Restrictions on
Intertemporal Marginal Rates of Substitution Implied by Euler Equations and Asset
Returns," Journal of Finance 49, 123-152.
(s) Lettau,
Martin and Sydney Ludvigson, 2001, “Resurrecting
the (C)CAPM: A Cross-Sectional Test When Risk
Premia are Time-Varying,” Journal of Political Economy 109,
1238-1287.
(s) Piazzesi,
Monica, Martin Schneider, and Selale Tuzel, 2005, “Housing,
Consumption, and Asset Pricing,” Unpublished Working Paper,
(s)
B. State Nonseparable Preferences
(s) Epstein, L. and S. Zin, 1989, "Substitution, Risk Aversion, and the
Temporal Behavior of Consumption and Asset Returns: A Theoretical
Framework," Econometrica 57, 937-969.
(s) Epstein, L. and
C. Habit Formation Models
(s) Mehra,
R. and
(s) Ferson, W. and G. Constantinides, 1991, "Habit Persistence and
Durability in Aggregate Consumption: Empirical Tests," Journal of
Financial Economics 29, 199-240.
(s) Heaton, J., 1994, "An
Empirical Investigation of Asset Pricing with Temporally Dependent Preference
Specifications," Econometrica 62, 801-817 .
D. Production Based Models
(s) Cochrane, J., 1991,
"Production-based Asset Pricing and the Link between Stock Returns and
Economic Fluctuations," Journal of Finance 46, 207-234.
XIV.
Bayesian Studies in Finance
A. Methodology
(r) Ch.
7 of Introduction to the Theory and Practice of Econometrics, 2nd Edition, George
G. Judge, R. Carter Hill, William E. Griffiths, Helmut Lütkepohl, Tsoung-Chao Lee .
(r) Casella, G. and E. I.
George, 1992, Explaining
the Gibbs Sampler, The American Statistician 46, 167-174.
B. Implementation
B.1.
Predictability
(s) Cremers, Martijn, 2002, "Stock
Return Predictability: A Bayesian Model Selection Perspective," Review of Financial Studies, Vol. 15,
No. 4, 1223-1249.
(s) Pastor, Lubos and
Robert F. Stambaugh, 2006, Predictive
systems: Living with imperfect predictors.
(r) Santa-Clara, Pedro, 2008, “Forecasting
Stock Market Returns: The Sum of the Parts is More Than
the Whole”, Working Paper, UCLA.
B.2
Factor Models
(s) Pastor, Lubos and
Robert F. Stambaugh, 1999, Costs
of equity capital and model mispricing, Journal of Finance 54,
67--121.
B.3 Stochastic Volatility
B.4
Mutual Funds
(s) Pastor, Lubos and Robert F. Stambaugh, 2002, Mutual
fund performance and seemingly unrelated assets, Journal of Financial
Economics 63, 315--349.
(r) Christopher S. Jones
and Jay Shanken, 2005, Mutual
fund performance with learning across funds, Journal of Financial Economics
78, 507-552.
B.5 Hedge
Funds
(r) Kosowski, Robert, Narayan Y. Naik, and Melvyn Teo, 2007, Do Hedge Funds Deliver Alpha? A Bayesian and Bootstrap Analysis, Journal of Financial Economics 84, 229-264.
(r) Campbell, J., A. Lo and C.
MacKinlay, "Chapter 4: Event Study Analysis" in The Econometrics
of Financial Markets.
A. Traditional Event Study
Methodology
(s) Fama, E., Fisher, L.,
Jensen, M. and R. Roll, 1969, "The Adjustment of Stock Prices to New
Information," International Economic Review 10, 1-21.
(s) Fama, E., 1976, Foundations of
Finance.
(s) Binder, J., 1985, "On
the Use of the Multivariate Regression Model in Event Studies," Journal
of Accounting Research 23, 370-383.
(s) Brown, S. and J. Warner,
1985, "Using Daily Stock Returns: The Case of Event Studies," Journal
of Financial Economics 14, 3-31.
(s) Thompson, R., 1985,
"Conditioning the Return-Generating Process on Firm Specific Events: A
Discussion of Event Study Methods," Journal of Financial and Quantitative
Analysis 20, 151-168.
(s) Malatesta,
P., 1986, "Measuring Abnormal Performance: The Event Parameter Approach
Using Joint Generalized Least Squares," Journal of Financial and
Quantitative Analysis 21, 27-38.
(s) Sefcik,
S. and R. Thompson, 1986, "An Approach to Statistical Inference in
Cross-sectional Models with Security Abnormal Returns as Dependent
Variable," Journal of Accounting Research 24, 316-334.
(s) Ball, C. and W. Torous,
1988, "Investigating Security Price Performance in the Presence of Event
Date Uncertainty," Journal of Financial Economics 22, 123-154.
(s) Boehmer, E., Musumeci, J. and A. Poulsen, 1991, "Event-Study
Methodology Under Conditions of Event-Induced Variance," Journal of
Financial Economics 30, 253-272.
(s) Prabhala,
N., 1997, "Conditional Methods in Event Studies and an Equilibrium
Justification for Standard Even-Study Procedures" Review of Financial
Studies 10, 1-38.
B. Long-run Performance
Measurement
(s) Ritter, J., 1991,
"The Long-term Performance of Initial Public Offerings" Journal of
Finance 46, 3-27.
(s) Speiss,
K., and J. Affleck-Graves, 1995, "Underperformance in Long-run Stock
Returns Following Seasoned Equity Offerings" Journal of Financial
Economics 38, 243-267.
(r) Barber, B. and J. Lyon, 1997,
"Detecting Long-Horizon Abnormal Stock Returns: The Empirical Power and
Specification of Test Statistics" Journal of Financial Economics
43, 341-368.
(r) Lyon, J., B. Barber and C. Tsai,
1997, "Improved
Methods for Tests of Long-Run Abnormal Returns" Journal of Finance 54,
165-201.
(s) Fama, E., 1998,
"Market Efficiency, Long-run Returns and Behavioral Finance" Journal
of Financial Economics 49, 283-306.
(s) Brav,
Alon, 2000 "Inference
in Long-Horizon Event Studies: A Rev-evaluation of the Evidence" Journal
of Finance 55, 1979-2016.
XVI. Fixed Income Securities
(s) Campbell, J., A. Lo and C.
MacKinlay, "Chapter 10: Fixed-Income Securities" and "Chapter
11: Term-Structure Models" in The Econometrics of Financial Markets.
A. The Term Structure of
Interest Rates
(s) Brennan, M. and E.
Schwartz, 1977, "Savings Bonds, Retractable Bonds and Callable
Bonds," Journal of Financial Economics 5, 67-88.
(s) Cox, J., Ingersoll, J. and
S. Ross, 1981, "A Re-examination of Traditional Hypotheses About the Term
Structure of Interest Rates," Journal of Finance 36, 769-799.
(s) Fama, E., 1984, "The
Information in the Term Structure," Journal of Financial Economics
13, 509-528.
(s) Brown, S. and P. Dybvig, 1986, "The Empirical Implications of the Cox,
Ingersoll, Ross Theory of the Term Structure of Interest Rates," Journal
of Finance 41, 617-632.
(s) Campbell, J., 1986,
"A Defense for the Traditional Hypotheses about the Term Structure of
Interest Rates," Journal of Finance 36, 769-800.
(s) Ho, T. and S. Lee, 1986,
"Term Structure Movements and Pricing Interest Rate Contingent
Claims," Journal of Finance 41, 1011-1029.
(s) Fama, E. and R. Bliss,
1987, "The Information in Long-Maturity Forward Rates," American
Economic Review 77, 680-692.
(s) Stambaugh, R., 1988,
"The Information in Forward Rates: Implications for Models of the Term
Structure," Journal of Financial Economics 21, 41-70.
(s) Longstaff, F., 1989,
"A Nonlinear General Equilibrium Model of the Term Structure of Interest
Rates," Journal of Financial Economics 23, 195-224.
(s) McCulloch, H., 1990,
"U.S. Government Term Structure Data," Appendix to R. Shiller,
"The Term Structure of Interest Rates," in Benjamin M. Friedman and
Frank H. Hahn, eds., Handbook of Monetary Economics.
(s) Pearson, N. and T. Sun,
1991, "An Empirical Examination of the Cox, Ingersoll and Ross Model of
the Term Structure of Interest Rates," Journal of Finance 49,
1279-1297.
(s) Pennacchi,
G., 1991, "Identifying the Dynamics of Real Interest Rates and Inflation:
Evidence Using Survey Data," Review of Financial Studies 4, 53-86.
(s) Chan, K.C., G.A. Karolyi,
F. Longstaff and A. Sanders, 1992, "An Empirical Comparison of Alternative
Models of the Short-term Interest Rate," Journal of Finance 47,
1209-1228.
(s) Longstaff, F. and E.
Schwartz, 1992, "Interest Rate Volatility and the Term Structure: A
Two-Factor General Equilibrium Model," Journal of Finance 47,
1259-1282.
(s) Sun, T., 1992, "Real
and Nominal Interest Rates: A Discrete-Time Model and Its Continuous-Time
Limit," Review of Financial Studies 5, 581-611.
(s) Campbell, J. and J. Ammer, 1993, "What Moves the Stock and Bond Markets? A
Variance Decomposition for Long-term Asset Returns," Journal of Finance
48, 3-37.
(s) Gibbons, M. and K. Ramaswamy, 1993, "The Term Structure of Interest
Rates: Empirical Evidence," Review of Financial Studies 6, 619-658.
(s) Ait-Sahalia,
Y., 1996, "Testing Continuous Time Models of the Spot Interest Rate" Review
of Financial Studies 9, 385-426.
(s) Stanton, R., 1997, "A
Nonparametric Model of Term Structure Dynamics and the Market Price of Interest
Rate Risk" Journal of Finance 52, 1973-2001.
(s) Jiang,
G., 1998, "Nonparametric Modeling of US Interest Rate Term Structure
Dynamics and Implications on the Prices of Derivative Securities" Journal
of Financial and Quantitative Analysis 33, 465-498.
B. Pricing Debt with
Default Risk
(s) Kaplan, R. and G. Urwitz, 1979, "Statistical Models of Bond Ratings: A
Methodological Inquiry," Journal of Business 52, 231-262.
(s) Lo, A., 1986, "Logit
Versus Discriminant Analysis: A Specification Test
with Applications to Corporate Bankruptcies," Journal of Econometrics
31, 151-178.
(s) Altman, E., 1989,
"Measuring Corporate Bond Mortality and Performance," Journal of
Finance 44, 909-922.
(s) Asquith, P., Mullins, D.
and E. Wolff, 1989, "Original Issue High Yield Bonds: Aging Analysis of
Defaults, Exchanges and Calls," Journal of Finance 44, 923-952.
(s) Blume, M., Keim, D. and
(s) Longstaff, F., and E.
Schwartz, 1995, "A Simple Approach to Valuing Risky Fixed and Floating
Rate Debt" Journal of Finance 50, 789-820.
(s) Jarrow,
R., D. Lando and
XVII. Pricing Options, Futures and Other
Derivative Assets
(r) Campbell, J., A. Lo and C.
MacKinlay, "Chapter 9: Derivative Pricing Models" in The
Econometrics of Financial Markets.
A. Option Pricing Models
(s) Cox, J. and S. Ross, 1976,
"The Valuation of Options for Alternative Stochastics
Processes," Journal of Financial Economics 3, 145-166.
(s) Latane,
H. and R. Rendleman, 1976, "Standard Deviations
of Stock Price Ratios Implied in Options Prices," Journal of Finance
31, 369-381.
(s) Merton, R., 1976,
"The Impact on Option Pricing of Specification Error in the Underlying
Stock Price Distribution," Journal of Finance 31, 333-350.
(s) Merton, R., 1976,
"Option Pricing When Underlying Stock Returns are Discontinuous," Journal
of Financial Economics 3, 125-144.
(s) Cox, J., Ross, S. and M.
Rubinstein, 1979, "Option Pricing: A Simplified Approach," Journal
of Financial Economics 7, 229-263.
(s) Whaley, R., 1982,
"Valuation of American Call Options on Dividend-Paying Stocks: Empirical
Tests," Journal of Financial Economics 10, 29-58.
(s) Cox, J. and M. Rubinstein,
1985, Options Markets, Prentice Hall. Chapter 6.
(s) Rubinstein, M., 1985,
"Nonparametric Tests of Alternative Option Pricing Models Using All
Reported Trades and Quotes on the 30 Most Active CBOE Option Classes from
August 23, 1976 Through August 31, 1978," Journal of Finance 40,
455-480.
(s) Lo, A., 1986,
"Statistical Tests of Contingent Claims Asset-Pricing Models: A New
Methodology," Journal of Financial Economics 17, 143-173.
(s)
(s) Lo, A., 1987, "Semiparametric Upper Bounds for Option Prices and Expected
Payoffs," Journal of Financial Economics 19, 373-388.
(s) Wiggins, J., 1987,
"Option Values Under Stochastic Volatility: Theory and Empirical
Estimates," Journal of Financial Economics 19, 351-372.
(s) Merton, R., 1990, Continuous-Time
Finance.
(s) Bates, D., 1991, "The
Crash of `87: Was It Expected? The Evidence from Options Markets," Journal
of Finance 46, 1009-1044.
(s) Grundy, B., 1991,
"Option Prices and the Underlying Asset's Return Distribution," Journal
of Finance 46, 1045-1070.
(s) Heston,
S., 1993, "A Closed-form Solution for Options with Stochastic Volatility
with Applications to Bond and Currency Options," Review of Financial
Studies 6, 327-343.
(s) Karolyi, G.A., 1993,
"A Bayesian Model of Stock Return Volatility for Option Valuation," Journal
of Financial and Quantitative Analysis, 579-594.
(s) Duan,
J.C., 1995, "GARCH Option Pricing Model," Mathematical Finance
5, 13-32.
(s) Lo, A. and J. Wang, 1995,
"Implementing Option Pricing Models when Asset Returns are
Predictable," Journal of Finance 50, 87-115.
(s) Bakshi,
G., C. Cao and Z. Chen, 1997, "Empirical Performance of Alternative Option
Pricing Models" Journal of Finance 52, 2003-2049.
(s) Poteshman,
Allan, and Jun Pan, 2003, The
Information in Option Volume for Stock Prices, Working paper, UIUC
and MIT.
(s) Lakonishok, Josef, Inmoo Lee, and Allen M. Poteshman,
2004, Investor behavior and
the option market, NBER Working Paper 10264.
B. Futures and Forward
Prices
(s) Hansen, L. and R. Hodrick, 1980, "Forward Exchange Rates as Optimal
Predictors of Future Spot Rates: An Econometric Analysis," Journal of
Political Economy 88, 829-853.
(s) MacKinlay, A. and K. Ramaswamy, 1988, "Index Futures Arbitrage and the
Behavior of Stock Index Futures Prices," Review of Financial Studies
1, 137-158.
(s) Siegel, D. and D. Siegel,
1990, Futures Markets.
(s) Stoll, H. and R. Whaley,
1990, "The Dynamics of Stock Index and Stock Index Futures Returns," Journal
of Financial and Quantitative Analysis 25,441-468.
(s) Chan, K., K.C. Chan and
G.A. Karolyi, 1991, "Intraday Volatility in the Stock Index and Stock
Index Futures Markets," Review of Financial Studies 4, 657-684.
XVIII. Non-Standard Approaches in Finance
(r) Campbell, J., A. Lo and C.
MacKinlay, "Chapter 12: Nonlinearities in Financial Data" in The
Econometrics of Financial Markets. Section 12.4.
A. Chaos and Nonlinear Dynamics
in Stock Returns
(s) Kahneman, D. and A.
Tversky, 1982, "The Psychology of Preferences," Scientific
American 246, 160-173.
(s) Gleick,
J., 1987, Chaos: Making a New Science.
(s) Tversky, A. and D.
Kahneman, 1987, "Rational Choice and the Framing of Decisions," in Rational
Choice: The Contrast Between Economics and Psychology, edited by R. Hogarth
and M. Reder.
(s) White, H., 1989,
"Some Asymptotic Results for Learning in Single Hidden-Layer Feedforward Network Models," Journal of the
American Statistical Association 84, 1003-1013.
(s) Hsieh, D., 1991,
"Chaos and Nonlinear Dynamics: Application to Financial Markets," Journal
of Finance 46, 1839-1877.
(s) Brock, W., Scheinkman, J. and B. LeBaron,
1992, "Simple Technical Trading Rules and the Stochastic Properties of
Stock Returns," Journal of Finance 47, 1731-1763.
(s) Hutchinson, J., A. Lo and
T. Poggio, 1994 "A Nonparametric Approach to
Pricing and Hedging Derivative Securities via Learning Networks," Journal
of Finance 49, 851-889.
B. Technical Trading Rules
(s) Murphy, J., 1986, Technical
Analysis of the Futures Market.
(s) Kho, B., 1996,
"Time-varying Risk Premia, Volatility and Technical
Trading Rule Profits: Evidence from Foreign Currency Futures Markets" Journal
of Financial Economics 41, 249-289.
Supplementary Mathematics
and Statistics References
Billingsley, P., 1968, Convergence
of Probability Measures.
Johnson, N. and
Johnson, N. and S. Kotz, 1969, Discrete Distributions.
Abramowitz, M. and I. Stegun, 1972, Handbook of Mathematical Functions with
Formulas, Graphs, and Mathematical Tables, 10th printing.
Johnson, N. and S. Kotz, 1972, Continuous Multivariate Distributions.
Arnold, L., 1974, Stochastic
Differential Equations: Theory and Applications. John Wiley.
Gradshtein,
Knuth, D., 1981, The Art of
Computer Programming, Volume 2: Seminumerical
Algorithms, Second Edition.
Lehmann, E., 1983, Theory of Point Estimation.
Lehmann, E., 1986, Testing Statistical
Hypotheses, Second Edition.
Press, W., Flannery, B., Teukolsky, S. and
Cormen, T., Leiserson,
C. and R. Rivest, 1990, Introduction to Algorithms.
James, F., 1990, "A
Review of Pseudorandom Number Generators," Computational Physics
Communications 60, 329-344.
Wolfram, S., 1990, Mathematica: A System for Doing Mathematics by
Computer.
(r) Stock, James H., and Mark W.
Watson, 2001, Vector Autoregressions, Journal of Economic Perspectives
15(4), 101-115.