The Conditional CAPM does not Explain Asset-Pricing Anamolies

Recent studies suggest that the conditional CAPM might hold, period-by-period, and that time-varying betas can explain the failures of the simple, unconditional CAPM. We argue, however, that significant departures from the unconditional CAPM would require implausibly large time-variation in betas and expected returns. Thus, the conditional CAPM is unlikely to explain asset-pricing anomalies like book-to-market and momentum. We test this conjecture empirically by directly estimating conditional alphas and betas from short-window regressions (avoiding the need to specify conditioning information). The tests show, consistent with our analytical results, that the conditional CAPM performs nearly as poorly as the unconditional CAPM.

PREDICTING RETURNS WITH FINANCIAL RATIOS

This article provides a new test of the predictive ability of aggregate financial ratios. Predictive regressions are subject to small-sample biases, but the correction in previous studies can substantially understate forecasting power. Dividend yield predicts aggregate market returns from 1946 – 2000, as well as in various subperiods. Book-to-market and the earnings-price ratio predict returns during the shorter 1963 – 2000 sample. The evidence remains strong despite the unusual price run-up in recent year

The Conditional CAPM Does Not Explain Asset-pricing Anomalies

Recent studies suggest that the conditional CAPM might hold, period-by-period, and that time-varying betas can explain the failures of the simple, unconditional CAPM. We argue, however, that significant departures from the unconditional CAPM would require implausibly large time-variation in betas and expected returns. Thus, the conditional CAPM is unlikely to explain asset-pricing anomalies like book-to-market and momentum. We test this conjecture empirically by directly estimating conditional alphas and betas from short-window regressions (avoiding the need to specify conditioning information). The tests show, consistent with our analytical results, that the conditional CAPM performs nearly as poorly as the unconditional CA

Stock Returns, Aggregate Earnings Surprises, and Behavioral Finance.

Abstract We study the stock market reaction to aggregate earnings news. Previous research shows that, for individual firms, stock prices react positively to earnings news but require several quarters to fully reflect the information in earnings. We find that the relation between returns and earnings is substantially different in aggregate data. First, returns are unrelated to past earnings, suggesting that prices neither underreact nor overreact to aggregate earnings news. Second, aggregate returns are negatively correlated with concurrent earnings; over the last 30 years, stock prices increased 6.5% in quarters with negative earnings growth and only 1.9% otherwise. This finding suggests that earnings and discount rates move together over time, and provides new evidence that discount-rate shocks explain a significant fraction of aggregate stock returns

Controls of Nucleosome Positioning in the Human Genome

Nucleosomes are important for gene regulation because their arrangement on the genome can control which proteins bind to DNA. Currently, few human nucleosomes are thought to be consistently positioned across cells; however, this has been difficult to assess due to the limited resolution of existing data. We performed paired-end sequencing of micrococcal nuclease-digested chromatin (MNase–seq) from seven lymphoblastoid cell lines and mapped over 3.6 billion MNase–seq fragments to the human genome to create the highest-resolution map of nucleosome occupancy to date in a human cell type. In contrast to previous results, we find that most nucleosomes have more consistent positioning than expected by chance and a substantial fraction (8.7%) of nucleosomes have moderate to strong positioning. In aggregate, nucleosome sequences have 10 bp periodic patterns in dinucleotide frequency and DNase I sensitivity; and, across cells, nucleosomes frequently have translational offsets that are multiples of 10 bp. We estimate that almost half of the genome contains regularly spaced arrays of nucleosomes, which are enriched in active chromatin domains. Single nucleotide polymorphisms that reduce DNase I sensitivity can disrupt the phasing of nucleosome arrays, which indicates that they often result from positioning against a barrier formed by other proteins. However, nucleosome arrays can also be created by DNA sequence alone. The most striking example is an array of over 400 nucleosomes on chromosome 12 that is created by tandem repetition of sequences with strong positioning properties. In summary, a large fraction of nucleosomes are consistently positioned—in some regions because they adopt favored sequence positions, and in other regions because they are forced into specific arrangements by chromatin remodeling or DNA binding proteins.</p

Controls of nucleosome positioning in the human genome

Nucleosomes are important for gene regulation because their arrangement on the genome can control which proteins bind to DNA. Currently, few human nucleosomes are thought to be consistently positioned across cells; however, this has been difficult to assess due to the limited resolution of existing data. We performed paired-end sequencing of micrococcal nuclease-digested chromatin (MNase-seq) from seven lymphoblastoid cell lines and mapped over 3.6 billion MNase-seq fragments to the human genome to create the highest-resolution map of nucleosome occupancy to date in a human cell type. In contrast to previous results, we find that most nucleosomes have more consistent positioning than expected by chance and a substantial fraction (8.7%) of nucleosomes have moderate to strong positioning. In aggregate, nucleosome sequences have 10 bp periodic patterns in dinucleotide frequency and DNase I sensitivity; and, across cells, nucleosomes frequently have translational offsets that are multiples of 10 bp. We estimate that almost half of the genome contains regularly spaced arrays of nucleosomes, which are enriched in active chromatin domains. Single nucleotide polymorphisms that reduce DNase I sensitivity can disrupt the phasing of nucleosome arrays, which indicates that they often result from positioning against a barrier formed by other proteins. However, nucleosome arrays can also be created by DNA sequence alone. The most striking example is an array of over 400 nucleosomes on chromosome 12 that is created by tandem repetition of sequences with strong positioning properties. In summary, a large fraction of nucleosomes are consistently positioned--in some regions because they adopt favored sequence positions, and in other regions because they are forced into specific arrangements by chromatin remodeling or DNA binding proteins

Epigenetic modifications are associated with inter-species gene expression variation in primates

Abstract Background Changes in gene regulation have long been thought to play an important role in evolution and speciation, especially in primates. Over the past decade, comparative genomic studies have revealed extensive inter-species differences in gene expression levels, yet we know much less about the extent to which regulatory mechanisms differ between species. Results To begin addressing this gap, we perform a comparative epigenetic study in primate lymphoblastoid cell lines, to query the contribution of RNA polymerase II and four histone modifications, H3K4me1, H3K4me3, H3K27ac, and H3K27me3, to inter-species variation in gene expression levels. We find that inter-species differences in mark enrichment near transcription start sites are significantly more often associated with inter-species differences in the corresponding gene expression level than expected by chance alone. Interestingly, we also find that first-order interactions among the five marks, as well as chromatin states, do not markedly contribute to the degree of association between the marks and inter-species variation in gene expression levels, suggesting that the marginal effects of the five marks dominate this contribution. Conclusions Our observations suggest that epigenetic modifications are substantially associated with changes in gene expression levels among primates and may represent important molecular mechanisms in primate evolution.http://deepblue.lib.umich.edu/bitstream/2027.42/110207/1/13059_2014_Article_547.pd