On monetary policy and stock market anomalies

This study utilizes a macro-based VAR framework to investigate whether stock portfolios formed on the basis of their value, size and past performance characteristics are affected in a differential manner by unexpected US monetary policy actions during the period 1967-2007. Full sample results show that value, small capitalization and past loser stocks are more exposed to monetary policy shocks in comparison to growth, big capitalization and past winner stocks. Subsample analysis, motivated by variation in the realized premia and parameter instability, reveals that monetary policy shocks’ impact on these portfolios is significant and pronounced only during the pre-1983 period.Monetary policy, Federal funds rate, Market anomalies, Credit channel, Risk premia

Mind Coskewness: A Performance Measure for Prudent, Long-Term Investors

This study examines how negative skewness a¤ects the behaviour of prudent investors. It also shows how the commonly used frame- work in the intertemporal asset pricing and the dynamic portfolio- consumption choice literature can generate negative skewness in asset reutrns. Given this impact, an extra premium is required in order to hold an asset with negatively coskewed returns. This premium was, on average, 2.09% p.a. for the UK stock market universe. Hence, a new performance measure, the intercept of the Harvey-Siddique two-factor asset pricing model is suggested for prudent, long-term investors. Us- ing this model, the performance of UK unit trusts is examined over the period 1991-2005. Despite exhibiting signi.cantly negative mana- gerial ability, trust managers were successful in reaping part of this negative coskewness premium.

Essays on Dynamic Asset Allocation and Performance Measures

The present thesis examines two central issues in financial theory, optimal portfolio choice and investment performance evaluation, when the restrictive assumptions of the traditional static, mean-variance framework of analysis are relaxed. Chapter 2 presents a series of model specifications for the risky asset's returns and the underlying risk factor and derives the corresponding optimal portfolio choices. It shows how important the modelling assumptions are for the implementation of dynamic asset allocation in practice and it contributes to the literature by examining the impact of horizon effects on portfolio choice in the presence of both predictability and stochastic volatility in asset returns. Moreover, this chapter shows how important is the introduction of an asset that completes the market and allows investors to hedge against the shocks that affect their opportunity set, Chapter 3 examines the bond portfolio choice of a long-term investor, making use of a macro-finance term structure model that allows for time-varying risk premia. This chapter shows how important is the failure of the expectations hypothesis for both myopic and long-term investors, since the time-variation in the bond premia dictates a market timing behaviour for investment as well as for hedging purposes. Incorporating macroeconomic information, that plays a significant role in bond pricing, we examine how this can be used for the formation of optimal portfolios· by long-term investors. Furthermore, this chapter serves as an evaluation of the very recent term structure models from an asset allocation perspective, drawing the attention to the correlation and the covariance structure of the bond returns. ' Chapter 4 employs the Harvey-Siddique asset pricing model and 'evaluates a sample of UK equity unit trusts, proposing the intercept of this model, that is termed as the Harvey-Siddique alpha, as a new performance measure. This asset pricing model adds to the CAPM the returns of a negative coskewness strategy as an extra risk factor. Constructing this factor for the UK stock market, it is shown that negative coskewness bears a high risk premium. This framework allows us to examine how the adoption of specific performance measures generates incentives in fund management. In particular, we provide evidence that fund managers, who are evaluated by mean-variance performance measures, are incentivized to load negative coskewness risk to their portfolios in order to reap the corresponding premium and present it as outperformance. Chapter 5 overviews the contributions of this thesis, discusses the numerous issues that arise from the present results and outlines the following steps in our research agenda

A Single-Factor Consumption-Based Asset Pricing Model

We propose a single-factor asset pricing model based on an indicator function of consumption growth being less than its endogenous certainty equivalent. This certainty equivalent is derived from generalized disappointment-aversion preferences, and it is located approximately 1 standard deviation below the conditional mean of consumption growth. Our single-factor model can explain the cross section of expected returns for size, value, reversal, profitability, and investment portfolios at least as well as the Fama–French multifactor models. Our results show strong empirical support for asymmetric preferences and question the effectiveness of the smooth utility framework, which is traditionally used in consumption-based asset pricing

Robust econometric inference for stock return predictability

This study examines stock return predictability via lagged financial variables with unknown stochastic properties. We propose a novel testing procedure that (1) robustifies inference to regressors' degree of persistence, (2) accommodates testing the joint predictive ability of financial variables in multiple regression, (3) is easy to implement as it is based on a linear estimation procedure, and (4) can be used for long-horizon predictability tests. We provide some evidence in favor of short-horizon predictability during the 1927-2012 period. Nevertheless, this evidence almost entirely disappears in the post–1952 period. Moreover, predictability becomes weaker, not stronger, as the predictive horizon increases

Idiosyncratic risk, risk-taking incentives and the relation between managerial ownership and firm value

In addition to its well-documented alignment effect, managerial ownership can also have value-destroying effects by shifting risk to managers and encouraging risk-substitution; that is, managers with relatively unhedged personal portfolios tend to pass up profitable projects with high idiosyncratic (firm-specific) risk in favor of less-profitable projects that have greater aggregate (market) risk. Using parametric and semi-parametric estimation methods, we examine how managerial ownership influences firm value in light of the trade-off between the alignment and the risk-substitution effects. We find that risk-substitution offsets the alignment effect of managerial ownership in firms that are exposed to severe risk-substitution problems, leading to a weak (or non-existent) association between managerial ownership and firm value. We identify a plausible channel for these effects by showing that firms exposed to risk-substitution exhibit more “conservative” investment and financing policies. We also show that the risk-substitution problem is partially mitigated by the inclusion of stock options in managerial compensation packages. Finally, our findings suggest that semi-parametric methods may prove useful for future studies aiming at capturing nonlinear features in the data

Elevated levels of MMP12 sourced from macrophages are associated with poor prognosis in urothelial bladder cancer

Biomarkers; Proteomics; Urothelial bladder cancerBiomarcadores; Proteómica; Cáncer de vejiga urotelialBiomarcadors; Proteòmica; Càncer de bufeta urotelialBackground Urothelial bladder cancer is most frequently diagnosed at the non-muscle-invasive stage (NMIBC). However, recurrences and interventions for intermediate and high-risk NMIBC patients impact the quality of life. Biomarkers for patient stratification could help to avoid unnecessary interventions whilst indicating aggressive measures when required. Methods In this study, immuno-oncology focused, multiplexed proximity extension assays were utilised to analyse plasma (n = 90) and urine (n = 40) samples from 90 newly-diagnosed and treatment-naïve bladder cancer patients. Public single-cell RNA-sequencing and microarray data from patient tumour tissues and murine OH-BBN-induced urothelial carcinomas were also explored to further corroborate the proteomic findings. Results Plasma from muscle-invasive, urothelial bladder cancer patients displayed higher levels of MMP7 (p = 0.028) and CCL23 (p = 0.03) compared to NMIBC patients, whereas urine displayed higher levels of CD27 (p = 0.044) and CD40 (p = 0.04) in the NMIBC group by two-sided Wilcoxon rank-sum tests. Random forest survival and multivariable regression analyses identified increased MMP12 plasma levels as an independent marker (p < 0.001) associated with shorter overall survival (HR = 1.8, p < 0.001, 95% CI:1.3–2.5); this finding was validated in an independent patient OLINK cohort, but could not be established using a transcriptomic microarray dataset. Single-cell transcriptomics analyses indicated tumour-infiltrating macrophages as a putative source of MMP12. Conclusions The measurable levels of tumour-localised, immune-cell-derived MMP12 in blood suggest MMP12 as an important biomarker that could complement histopathology-based risk stratification. As MMP12 stems from infiltrating immune cells rather than the tumor cells themselves, analyses performed on tissue biopsy material risk a biased selection of biomarkers produced by the tumour, while ignoring the surrounding microenvironment.Open access funding provided by Uppsala University. This work was supported by the Swedish Society for Medical Research (S15-0065) to S.M. and the Swedish Cancer Foundation (CAN 2017/199) to P-U. M. The funding bodies did not influence the research performed

Elevated levels of MMP12 sourced from macrophages are associated with poor prognosis in urothelial bladder cancer

Abstract Background Urothelial bladder cancer is most frequently diagnosed at the non-muscle-invasive stage (NMIBC). However, recurrences and interventions for intermediate and high-risk NMIBC patients impact the quality of life. Biomarkers for patient stratification could help to avoid unnecessary interventions whilst indicating aggressive measures when required. Methods In this study, immuno-oncology focused, multiplexed proximity extension assays were utilised to analyse plasma (n = 90) and urine (n = 40) samples from 90 newly-diagnosed and treatment-naïve bladder cancer patients. Public single-cell RNA-sequencing and microarray data from patient tumour tissues and murine OH-BBN-induced urothelial carcinomas were also explored to further corroborate the proteomic findings. Results Plasma from muscle-invasive, urothelial bladder cancer patients displayed higher levels of MMP7 (p = 0.028) and CCL23 (p = 0.03) compared to NMIBC patients, whereas urine displayed higher levels of CD27 (p = 0.044) and CD40 (p = 0.04) in the NMIBC group by two-sided Wilcoxon rank-sum tests. Random forest survival and multivariable regression analyses identified increased MMP12 plasma levels as an independent marker (p < 0.001) associated with shorter overall survival (HR = 1.8, p < 0.001, 95% CI:1.3–2.5); this finding was validated in an independent patient OLINK cohort, but could not be established using a transcriptomic microarray dataset. Single-cell transcriptomics analyses indicated tumour-infiltrating macrophages as a putative source of MMP12. Conclusions The measurable levels of tumour-localised, immune-cell-derived MMP12 in blood suggest MMP12 as an important biomarker that could complement histopathology-based risk stratification. As MMP12 stems from infiltrating immune cells rather than the tumor cells themselves, analyses performed on tissue biopsy material risk a biased selection of biomarkers produced by the tumour, while ignoring the surrounding microenvironment