Asset Pricing in China: Evidence from the Shanghai Stock Exchange

Capital market theory is concerned with the equilibrium relationship between risk and expected return on financial claims. Within this framework, this paper seeks to extend the mounting evidence against the view that the beta coefficient of the Capital Asset Pricing Model is the sole measure of risk. In this paper we test the multifactor approach to asset pricing in one of the most challenging international markets, the Shanghai Stock Exchange, China. Firstly, we seek to determine whether size and value premia exist in China. Secondly, we address the challenge that size and value premia are largely determined by seasonal factors (such as the January and/or Chinese New Year effect). Our findings suggest that mean-variance efficient investors in China can select some combination of small and low book-to-market equity firms in addition to the market portfolio to generate superior risk-adjusted returns. Moreover, we find no evidence to support the view that seasonal effects explain the findings of the multifactor model. In summary, we suggest the market factor alone is not sufficient to describe the cross-section of average stock returns in China.Asset Pricing; Seasonal Effects; China.

Pricing of Equities in China: Evidence from the Shanghai Stock Exchange

In this paper we compare the performance of the traditional CAPM with the multifactor model of Fama and French (1996) for equities listed in the Shanghai Stock Exchange. We also investigate the explanatory power of idiosyncratic volatility and respond to the claim that multifactor model findings can be explained by the turn of the year effect. Our results show that firm size, book to market equity and idiosyncratic volatility are priced risk factors in addition to the theoretically well specified market factor. As far as the turn of the year effect is concerned we reject the claim that the findings are driven by seasonal factors. Our findings have implications for both academic researchers and practitioners. This is because we demonstrate that by following the investment strategies investigated in this paper superior returns could be generated – returns in addition to those offered by the market. Of course this is only applicable to those investors who are willing to take additional risks in order to generate additional returns. In summary, our results show that a broader asset pricing model such as the one investigated in this paper does a much better job than the single index CAPM.Asset Pricing, CAPM, China, Small Firm Effect, Turn of the Year Effect.

Is Idiosyncratic Volatility Priced? Evidence from the Shanghai Stock Exchange

This paper employs the mimicking portfolio approach of Fama and French (1996) and asks whether idiosyncratic volatility is priced. This paper also provides evidence on whether returns on small stocks are higher in January than in remaining months. Our findings reveal that (a) idiosyncratic volatility is priced; and, (b) the multifactor model provides a better description of average returns than the traditional CAPM. We also find that the absolute pricing errors of the CAPM are large when compared with the multifactor model. We argue that firm size and idiosyncratic volatility may serve as proxies for systematic risk. We also dismiss the claim that returns on small stocks are on average higher in January than in remaining months. In summary, investors interested in taking additional risks should invest in small and low idiosyncratic volatility firms in addition to the market portfolio. This is because our findings indicate that investors can generate substantial returns by investing in strategies unrelated to market movements.Idiosyncratic Volatility, Firm Size, Asset Pricing, China.

Equity Premium: - Does it exist? Evidence from Germany and United Kingdom

Malkiel and Xu (1997) state that idiosyncratic volatility is highly correlated with size and that it plays a powerful role in explaining expected returns. In this paper we ask (a) whether idiosyncratic volatility is useful in explaining the variation in expected returns; and, (b) whether our findings can be explained by the turn of the year effect. We find that (a) our three-factor model provides a better description of expected returns than the CAPM. That is, we find that firm size and idiosyncratic volatility are related to security returns. In addition, we also find that our findings are robust throughout the sample period. We show that the CAPM beta alone is not sufficient to explain the variation in stock returns.Idiosyncratic Volatility, Size Effect, CAPM, Risk Premia

Equity Premium: - Does it exist? Evidence from Germany and United Kingdom

Malkiel and Xu (1997) state that idiosyncratic volatility is highly correlated with size and that it plays a powerful role in explaining expected returns. In this paper we ask (a) whether idiosyncratic volatility is useful in explaining the variation in expected returns; and, (b) whether our findings can be explained by the turn of the year effect. We find that (a) our three-factor model provides a better description of expected returns than the CAPM. That is, we find that firm size and idiosyncratic volatility are related to security returns. In addition, we also find that our findings are robust throughout the sample period. We show that the CAPM beta alone is not sufficient to explain the variation in stock returns

The Ties That Bond: Personal Ties, Inter-firm Relations, and Economic Development *

Abstract This paper explores the consequences of an improving legal system on an economy that has heretofore relied on relational (informal) contracting. We show such improvement can be welfare enhancing or welfare reducing. In the latter case, we show that often a mediocre legal system is worse than either a bad legal system or an excellent system, with the second often being superior to relational contracting. If the quality of the legal system is positively correlated with development, then this paper offers explanations for why efforts to enhance relational contracting, including promoting personal ties, are critical in early stages of development, but why developed economies will tend, instead, to rely on formal contracting and be suspicious of personal ties. In some cases, it pays to use both informal and formal contracting, with formal contracting serving to enhance relational contracting

Forest Fragmentation as Cause of Bacterial Transmission among Nonhuman Primates, Humans, and Livestock, Uganda

Anthropogenic disturbance increases bacterial transmission

A ChIP-Seq Benchmark Shows That Sequence Conservation Mainly Improves Detection of Strong Transcription Factor Binding Sites

Transcription factors are important controllers of gene expression and mapping transcription factor binding sites (TFBS) is key to inferring transcription factor regulatory networks. Several methods for predicting TFBS exist, but there are no standard genome-wide datasets on which to assess the performance of these prediction methods. Also, it is believed that information about sequence conservation across different genomes can generally improve accuracy of motif-based predictors, but it is not clear under what circumstances use of conservation is most beneficial.Here we use published ChIP-seq data and an improved peak detection method to create comprehensive benchmark datasets for prediction methods which use known descriptors or binding motifs to detect TFBS in genomic sequences. We use this benchmark to assess the performance of five different prediction methods and find that the methods that use information about sequence conservation generally perform better than simpler motif-scanning methods. The difference is greater on high-affinity peaks and when using short and information-poor motifs. However, if the motifs are specific and information-rich, we find that simple motif-scanning methods can perform better than conservation-based methods.Our benchmark provides a comprehensive test that can be used to rank the relative performance of transcription factor binding site prediction methods. Moreover, our results show that, contrary to previous reports, sequence conservation is better suited for predicting strong than weak transcription factor binding sites

Epidemiology and Molecular Relationships of Cryptosporidium spp. in People, Primates, and Livestock from Western Uganda

Cryptosporidium is a common gastrointestinal parasite known for its zoonotic potential. We found Cryptosporidium in 32.4% of people, 11.1% of non-human primates, and 2.2% of livestock in the region of Kibale National Park, Uganda. In people, infection rates were higher in one community than elsewhere, and fetching water from an open water source increased the probability of infection. Phylogenetic analyses identified clusters of Cryptosporidium with mixed host origins in people, primates, and livestock outside the park; however, parasites from primates inside the park were genetically divergent, suggesting a separate sylvatic transmission cycle. Infection was not associated with clinical disease in people, even in the case of co-infection with the gastrointestinal parasite Giardia duodenalis. Parasites such as Cryptosporidium may be maintained through frequent cross-species transmission in tropical settings where people, livestock, and wildlife interact frequently, but the parasite may undergo more host-specific transmission where such interactions do not occur. Persistent low-level shedding and immunity may limit the clinical effects of infection in such settings

Is Idiosyncratic Volatility Priced? Evidence from the Shanghai Stock Exchange

This paper employs the mimicking portfolio approach of Fama and French (1996) and asks whether idiosyncratic volatility is priced. This paper also provides evidence on whether returns on small stocks are higher in January than in remaining months. Our findings reveal that (a) idiosyncratic volatility is priced; and, (b) the multifactor model provides a better description of average returns than the traditional CAPM. We also find that the absolute pricing errors of the CAPM are large when compared with the multifactor model. We argue that firm size and idiosyncratic volatility may serve as proxies for systematic risk. We also dismiss the claim that returns on small stocks are on average higher in January than in remaining months. In summary, investors interested in taking additional risks should invest in small and low idiosyncratic volatility firms in addition to the market portfolio. This is because our findings indicate that investors can generate substantial returns by investing in strategies unrelated to market movements. Keywords: Idiosyncratic Volatility, Firm Size, Asse