Style migration in Europe

This paper complements the literature on style migration by examining value and size premiums throughout Europe. Information from more than 25 European markets indicates an average value premium of 9.58% per year. The primary determinants of the persistent value outperformance are: 1) value firms migrating to a neutral or growth portfolio, and 2) growth stocks migrating to neutral or value portfolios. The financial health metric F_SCORE helps uncover outperforming stocks ex ante, and provides preliminary evidence on the probability of migration, but only for small stocks

Gender, style diversity and their effect on fund performance

© 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license(http://creativecommons.org/licenses/by/4.0/).This paper examines the performance of 358 European diversified equity mutual funds controlling for gender diversity. Fund performance is evaluated against funds’ designated market indices and representative style portfolios. Consistently with previous studies, proper statistical tests point to the absence of significant differences in performance and risk between female and male managed funds. However, perverse market timing manifests itself mainly in female managed funds and in the left tail of the returns distribution. Interestingly, at fund level there is evidence of significant overperformance that survives even after accounting for funds’ exposure to known risk factors. Employing a quantile regression approach reveals that fund performance is highly dependent on the selection of the specific quantile of the returns distribution; also, style consistency for male and female managers manifests itself across different quantiles. These results have important implications for fund management companies and for retail investors’ asset allocation strategies

The value premium and time-varying volatility

Numerous studies have documented the failure of the static and conditional capital asset pricing models to explain the difference in returns between value and growth stocks. This paper examines the post-1963 value premium by employing a model that captures the time-varying total risk of the value-minus-growth portfolios. Our results show that the time-series of value premia is strongly and positively correlated with its volatility. This conclusion is robust to the criterion used to sort stocks into value and growth portfolios and to the country under review (the US and the UK). Our paper is consistent with evidence on the possible role of idiosyncratic risk in explaining equity returns, and also with a separate strand of literature concerning the relative lack of reversibility of value firms' investment decisions

Sector level cost of equity in African financial markets

This paper assesses the effectiveness of Liu (2006) metrics in measuring illiquidity within a multifactor CAPM pricing model. Costs of equity are estimated using this model for the major sectors within Africa’s larger equity markets: Morocco, Tunisia, Egypt, Kenya, Nigeria, Zambia, Botswana and South Africa. In all countries, the cost of equity is found to be highest in the financial sector and lowest in the blue chip stocks of Tunisia, Morocco, Namibia and South Africa. At an aggregate level, Nigeria and Zambia have the highest cost of capital

Earnings Management and the Long‐Run Market Performance of Initial Public Offerings

Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/95683/1/0022-1082.00079.pd

Learning the Futility of the Thought Suppression Enterprise in Normal Experience and in Obsessive Compulsive Disorder

The belief that we can control our thoughts is not inevitably adaptive, particularly when it fuels mental control activities that have ironic unintended consequences. The conviction that the mind can and should be controlled can prompt people to suppress unwanted thoughts, and so can set the stage for the intrusive return of those very thoughts. An important question is whether or not these beliefs about the control of thoughts can be reduced experimentally. One possibility is that behavioral experiments aimed at revealing the ironic return of suppressed thoughts might create a lesson that could reduce unrealistic beliefs about the control of thoughts. Aims: The present research assessed the influence of the thought suppression demonstration on beliefs about the control of thoughts in a non-clinical sample, and among individuals with obsessive-compulsive disorder (OCD). Method: In Study 1, we assessed the effect of the thought suppression demonstration on beliefs about the control of thoughts among low and high obsessive individuals in the non-clinical population (N = 62). In Study 2, we conducted a similar study with individuals with OCD (N = 29). Results: Results suggest that high obsessive individuals in the non-clinical population are able to learn the futility of suppression through the thought suppression demonstration and to alter their faulty beliefs about the control of thoughts; however, for individuals with OCD, the demonstration may be insufficient for altering underlying beliefs. Conclusions: For individuals with OCD, the connection between suppressing a neutral thought in the suppression demonstration and suppressing a personally relevant obsession may need to be stated explicitly in order to affect their obsessive beliefs.Psycholog

Pricing European Options with a Log Student's t-Distribution: a Gosset Formula

The distribution of the returns for a stock are not well described by a normal probability density function (pdf). Student's t-distributions, which have fat tails, are known to fit the distributions of the returns. We present pricing of European call or put options using a log Student's t-distribution, which we call a Gosset approach in honour of W.S. Gosset, the author behind the nom de plume Student. The approach that we present can be used to price European options using other distributions and yields the Black-Scholes formula for returns described by a normal pdf.Comment: 12 journal pages, 9 figures and 3 tables (Submitted to Physica A

When Does Information Asymmetry Affect the Cost of Capital?

This paper examines when information asymmetry among investors affects the cost of capital in excess of standard risk factors. When equity markets are perfectly competitive, information asymmetry has no separate effect on the cost of capital. When markets are imperfect, information asymmetry can have a separate effect on firms’ cost of capital. Consistent with our prediction, we find that information asymmetry has a positive relation with firms’ cost of capital in excess of standard risk factors when markets are imperfect and no relation when markets approximate perfect competition. Overall, our results show that the degree of market competition is an important conditioning variable to consider when examining the relation between information asymmetry and cost of capital