47 research outputs found
Measuring portfolio performance using a modified measure of risk
This paper reports the results of an investigation into the properties of a theoretical modification of beta proposed by Leland (1999) and based on earlier work of Rubinstein (1976). It is shown that when returns are elliptically symmetric, beta is the appropriate measure of risk and that there are other situations in which the modified beta will be similar to the traditional measure based on the capital asset pricing model. For the case where returns have a normal distribution, it is shown that the criterion either does not exist or reduces exactly to the conventional beta. It is therefore conjectured that the modified measure will only be useful for portfolios that have nonstandard return distributions which incorporate skewness. For such situations, it is shown how to estimate the measure using regression and how to compare the resulting statistic with a traditional estimated beta using Hotelling's test. An empirical study based on stocks from the FTSE350 does not find evidence to support the use of the new measure even in the presence of skewness.Journal of Asset Management (2007) 7, 388-403. doi:10.1057/palgrave.jam.225005
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Social media, political uncertainty, and the stock market
This study proposes a new measure of firm-level uncertainty exposure around important political events. More specifically, we construct a degree of (dis)agreement among social media users who jointly mention firms and politicians. We study a sample of over 23 million tweets mentioning both a firm from the S&P 500 composite and ‘Trump’ from October 2016 to May 2017. We then analyze the relationship between the (dis)agreement measure and individual stock features. The results suggest that increased disagreement among such tweets is associated with heightened stock price volatility and trading volume. This link is observed before the US Presidential Inauguration in January 2017 but not afterwards. The finding is confirmed by further robustness checks based on filtered tweets with policy keywords and policy-sensitive industries