| 1. |
- Menkveld, Albert J., et al.
(författare)
-
Nonstandard Errors
- 2024
-
Ingår i: JOURNAL OF FINANCE. - : Wiley-Blackwell. - 0022-1082 .- 1540-6261. ; 79:3, s. 2339-2390
-
Tidskriftsartikel (refereegranskat)abstract
- In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty-nonstandard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for more reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants.
|
|
| 2. |
- Hjalmarsson, Erik, 1975, et al.
(författare)
-
Efficiency in housing markets: Do home buyers know how to discount?
- 2006
-
Rapport (övrigt vetenskapligt/konstnärligt)abstract
- We test for efficiency in the market for Swedish co-ops by examining the negative relationship between the sales price and the present value of future rents. If the co-op housing market is efficient, the present value of co-op rental payments due to underlying debt obligations of the cooperative should be fully reflected in the sales price. However, we find that, on average, a one hundred kronor increase in the present value of future rents only leads to a 45 to 65 kronor reduction in the sales price; co-ops with higher rents are thus relatively overpriced compared to those with lower rents. Our analysis indicates that pricing tends to be more efficient in areas with higher educated and wealthier buyers. By relying on cross-sectional relationships in the data, our results are less sensitive to transaction costs and other frictions than time-series tests of housing market efficiency.
|
|
| 3. |
- Hjalmarsson, Erik, 1975, et al.
(författare)
-
Efficiency in housing markets: Which home buyers know how to discount?
- 2009
-
Ingår i: Journal of Banking and Finance. - : Elsevier BV. - 0378-4266. ; 33:11, s. 2150-2163
-
Tidskriftsartikel (refereegranskat)abstract
- We test for efficiency in the Swedish co-op market by examining the negative relationship between the sales price and the present value of future monthly payments or 'rents'. If the co-op housing market is efficient, the present value of co-op rental payments due to underlying debt obligations of the cooperative should be fully reflected in the sales price. However, a one hundred kronor increase in the present value of future rents only leads to an approximately 75 kronor reduction in the sales price. These inefficiencies are larger at the lower end of the housing market and in poorer, less educated regions and appear to reflect both liquidity constraints and the existence of more 'sophisticated' buyers in higher educated areas. Overall, our findings suggest that there is some systematic failure to properly discount the future stream of rent payments relative to the up front sales price.
|
|
| 4. |
- Bakshi, Gurdip, et al.
(författare)
-
Volatility of the Stochastic Discount Factor, and the Distinction between Risk-Neutral and Objective Probability Measures
- 2005
-
Rapport (övrigt vetenskapligt/konstnärligt)abstract
- This paper derives a measure that characterizes the distance between the risk-neutral and the objective probability measures for any candidate asset pricing model. We formally show that the distance metric is equal to the volatility of the stochastic discount factor. This theoretical result gives an alternative interpretation to the Hansen-Jagannathan bounds: they provide a lower bound for the distance between the objective and the risk-neutral probability measures. Our empirical application provides support for the notion that the crash of 1987 has widened the wedge between the risk-neutral and the objective probability measures.
|
|
| 5. |
- Beechey, Meredith, et al.
(författare)
-
Testing the expectations hypothesis when interest rates are near integrated
- 2009
-
Ingår i: Journal of Banking & Finance. - : Elsevier BV. - 0378-4266 .- 1872-6372. ; 33:5, s. 934-943
-
Tidskriftsartikel (refereegranskat)abstract
- Nominal interest rates are unlikely to be generated by unit-root processes. Using data on short and long interest rates from eight developed and six emerging economies, we test the expectations hypothesis using cointegration methods under the assumption that interest rates are near integrated. If the null hypothesis of no cointegration is rejected, we then test whether the estimated cointegrating vector is consistent with that suggested by the expectations hypothesis. The results show support for cointegration in 10 of the 14 countries we consider, and the cointegrating vector is similar across countries. However, the parameters differ from those suggested by theory. We relate our findings to existing literature on the failure of the expectations hypothesis and to the role of term premia.
|
|
| 6. |
- Benos, Evangelos, et al.
(författare)
-
Interactions among High-Frequency Traders
- 2016
-
Rapport (övrigt vetenskapligt/konstnärligt)abstract
- Using unique transactions data for individual high-frequency trading (HFT) firms in the U.K. equity market, we examine the extent to which the trading activity of individual HFT firms is correlated with each other and the impact on price effciency. We find that HFT order flow, net positions, and total volume exhibit significantly higher commonality than those of a comparison group of investment banks. However, intraday HFT order flow commonality is associated with a permanent price impact, suggesting that commonality in HFT activity is information-based and so does not generally contribute to undue price pressure and price dislocations.
|
|
| 7. |
- Benos, Evangelos, et al.
(författare)
-
Interactions among High-Frequency Traders
- 2017
-
Ingår i: Journal of Financial and Quantitative Analysis. - 0022-1090 .- 1756-6916. ; 52:4, s. 1375-1402
-
Tidskriftsartikel (refereegranskat)abstract
- © 2017 Michael G. Foster School of Business, University of Washington. Using unique transactions data for individual high-frequency trading (HFT) firms in the U.K. equity market, we examine the extent to which the trading activity of individual HFT firms is correlated with each other and the impact on price efficiency. We find that HFT order flow, net positions, and total volume exhibit significantly higher commonality than those of a comparison group of investment banks. However, intraday HFT order flow commonality is associated with a permanent price impact, suggesting that commonality in HFT activity is information based and so does not generally contribute to undue price pressure and price dislocations.
|
|
| 8. |
- Berger, David, et al.
(författare)
-
What drives volatility persistence in the foreign exchange market?
- 2009
-
Ingår i: Journal of Financial Economics. - : Elsevier BV. - 0304-405X. ; 94:2, s. 192-213
-
Tidskriftsartikel (refereegranskat)abstract
- We propose a new empirical specification of volatility that links volatility to the information flow, measured as the order flow in the market, and to the price sensitivity to that information. The time-varying market sensitivity to information is estimated from high-frequency data, and movements in volatility can therefore be directly related to movements in order flow and market sensitivity. Empirically, the model explains a large share of the long-run variation in volatility. Importantly, the time variation in the market's sensitivity to information is at least as relevant in explaining the persistence of volatility as the rate of information arrival itself. This may be evidence of a link between changes over time in the aggregate behavior of market participants and the time-series properties of realized volatility.
|
|
| 9. |
- Chaboud, A. P., et al.
(författare)
-
Rise of the Machines: Algorithmic Trading in the Foreign Exchange Market
- 2014
-
Ingår i: Journal of Finance. - : Wiley. - 0022-1082. ; 69:5, s. 2045-2084
-
Tidskriftsartikel (refereegranskat)abstract
- We study the impact of algorithmic trading (AT) in the foreign exchange market using a long time series of high-frequency data that identify computer-generated trading activity. We find that AT causes an improvement in two measures of price efficiency: the frequency of triangular arbitrage opportunities and the autocorrelation of high-frequency returns. We show that the reduction in arbitrage opportunities is associated primarily with computers taking liquidity. This result is consistent with the view that AT improves informational efficiency by speeding up price discovery, but that it may also impose higher adverse selection costs on slower traders. In contrast, the reduction in the autocorrelation of returns owes more to the algorithmic provision of liquidity. We also find evidence consistent with the strategies of algorithmic traders being highly correlated. This correlation, however, does not appear to cause a degradation in market quality, at least not on average.
|
|
| 10. |
- Chaboud, A., et al.
(författare)
-
The evolution of price discovery in an electronic market
- 2021
-
Ingår i: Journal of Banking & Finance. - : Elsevier BV. - 0378-4266. ; 130
-
Tidskriftsartikel (refereegranskat)abstract
- We study the evolution of the price discovery process in the euro-dollar and dollar-yen currency pairs over a ten-year period on the EBS platform, a global trading venue used by both manual and automated traders. We find that the importance of market orders decreases sharply over that period, owing mainly to a decline in the information share from manual trading, while the information share of market orders from algorithmic and high-frequency traders remains fairly constant. At the same time, there is a substantial, but gradual, increase in the information share of limit orders. Price discovery also becomes faster, suggesting improvements in market efficiency. The results are consistent with theoretical predictions that with a lower information advantage, informed traders tend to use more limit orders. Published by Elsevier B.V.
|
|
| 11. |
- Chiquoine, Benjamin, et al.
(författare)
-
Jackknifing stock return predictions
- 2009
-
Ingår i: Journal of Empirical Finance. - : Elsevier BV. - 0927-5398. ; 16:5, s. 793-803
-
Tidskriftsartikel (refereegranskat)abstract
- We show that the general bias-reducing technique of jackknifing can be successfully applied to stock return predictability regressions. Compared to standard OLS estimation, the jackknifing procedure delivers virtually unbiased estimates with mean squared errors that generally dominate those of the OLS estimates. The jackknifing method is very general, as well as simple to implement, and can be applied to models with multiple predictors and overlapping observations. Unlike most previous work on inference in predictive regressions, no specific assumptions regarding the data generating process for the predictors are required. A set of Monte Carlo experiments show that the method works well in finite samples and the empirical section finds that out-of-sample forecasts based on the jackknife estimates tend to outperform those based on the plain OLS estimates. The improved forecast ability also translates into economically relevant welfare gains for an investor who uses the predictive regression, with jackknife estimates, to time the market.
|
|
| 12. |
- Farago, Adam, 1984, et al.
(författare)
-
Compound Returns
- 2019
-
Rapport (övrigt vetenskapligt/konstnärligt)abstract
- We provide a theoretical basis for understanding the properties of compound re-turns. At long horizons, multiplicative compounding induces extreme positive skewness into individual stock returns, an effect primarily driven by single-period volatility. As a consequence, most individual stocks perform very poorly. However, holding just a few stocks (instead of a single one) greatly improves the long-run prospects of an investment strategy, indicating that missing out on the “lucky few” winner stocks is not a great concern. We show analytically how this somewhat counterintuitive result arises from an interaction between compounding, diversification, and rebalancing that has seemingly not been previously noted.
|
|
| 13. |
- Farago, Adam, 1984, et al.
(författare)
-
Long-Horizon Stock Returns Are Positively Skewed
- 2022
-
Ingår i: Review of Finance. - : Oxford University Press (OUP). - 1572-3097 .- 1573-692X. ; 27:2, s. 495-538
-
Tidskriftsartikel (refereegranskat)abstract
- At long horizons, multiplicative compounding induces strong-to-extreme positive skewness into stock returns; the magnitude of the effect is primarily determined by single-period volatility. Consequently, at horizons greater than 5 years, returns-individual or portfolio-will be positively skewed under reasonable parameterizations. From an investor perspective, the strong positive skewness implies that the mean compound return will serve as a poor guide for typical long-horizon outcomes. Moreover, the large effects of compounding on higher-order moments are shown to affect the validity of Taylor expansions used to approximate preferences for skewness, when applied to returns of annual or longer horizons.
|
|
| 14. |
- Farago, Adam, 1984, et al.
(författare)
-
Small Rebalanced Portfolios Often Beat the Market over Long Horizons
- 2022
-
Ingår i: Review of Asset Pricing Studies. - : Oxford University Press (OUP). - 2045-9920 .- 2045-9939. ; 13:2, s. 307-342
-
Tidskriftsartikel (refereegranskat)abstract
- The distribution of long-run compound returns to portfolio strategies is greatly affected by periodic rebalancing. Over time, buy-and-hold portfolios gradually lose diversification as extreme long-run skewness in individual stock returns leads to increasingly concentrated holdings. For long investment horizons, small rebalanced portfolios holding only a fraction of all stocks therefore achieve better diversification than much larger marketwide buy-and-hold portfolios. Consequently, over long horizons, rebalanced portfolios tend to outperform buy-and-hold portfolios, and risk-averse investors prefer the former. Empirical results strongly support the theoretical predictions and add further evidence to the strong empirical performance of (small) equal-weighted portfolios.
|
|
| 15. |
- Farago, Adam, 1984, et al.
(författare)
-
Stock Price Co-Movement and the Foundations of Pairs Trading
- 2019
-
Ingår i: Journal of Financial and Quantitative Analysis. - 0022-1090 .- 1756-6916. ; 54:2, s. 629-665
-
Tidskriftsartikel (refereegranskat)abstract
- We study the theoretical implications of cointegrated stock prices on the profitability of pairs-trading strategies. If stock returns are fairly weakly correlated across time, cointegration implies very high Sharpe ratios. To the extent that the theoretical Sharpe ratios are too large, our results suggest that either i) cointegration does not exist pairwise among stocks, and pairs-trading profits are a result of a weaker or less stable dependency structure among stock pairs, or ii) the serial correlation in stock returns stretches over considerably longer horizons than is usually assumed. Empirically, there is little evidence of cointegration, favoring the first explanation.
|
|
| 16. |
- Hjalmarsson, Erik, 1975, et al.
(författare)
-
A micro-data analysis of households’ expectations of mortgage rates
- 2019
-
Ingår i: Economics Letters. - : Elsevier BV. - 0165-1765 .- 1873-7374. ; 185
-
Tidskriftsartikel (refereegranskat)abstract
- We analyse micro-level survey data, ranging from 2010 to 2017, on Swedish households’ mortgage-rate expectations. Our key finding is that expectations at the longest horizon are significantly related to age, where the youngest age group has the lowest expectations.
|
|
| 17. |
- Hjalmarsson, Erik, 1975, et al.
(författare)
-
Anchoring in surveys of household expectations
- 2021
-
Ingår i: Economics Letters. - : Elsevier BV. - 0165-1765 .- 1873-7374. ; 198
-
Tidskriftsartikel (refereegranskat)abstract
- We assess whether the concept of anchoring - where a respondent's answer is affected by the reference number stated in the survey question - is related to the characteristics of the respondent. Using a survey of household expectations of Swedish housing prices, we find significant differences in observed anchoring across groups reflecting age, income, homeownership and sex. Implications for the interpretation of survey results are discussed. (C) 2020 The Author(s). Published by Elsevier B.V.
|
|
| 18. |
|
|
| 19. |
- Hjalmarsson, Erik, 1975, et al.
(författare)
-
Dividend Growth Does Not Help Predict Returns Compared To Likelihood-Based Tests: An Anatomy of the Dog
- 2021
-
Ingår i: Critical Finance Review. - : Now Publishers. - 2164-5744 .- 2164-5760. ; 10:3, s. 445-464
-
Tidskriftsartikel (refereegranskat)abstract
- The dividend-growth based test of return predictability, proposed by Cochrane (2008), is similar to a likelihood-based test of the standard return-predictability model, treating the autoregressive (AR) parameter of the dividend-price ratio as known. In comparison to standard OLS-based inference, both tests can achieve power gains by using restrictions or prior information on the value of the AR parameter. When compared to the likelihood-based test, there are no power advantages for the dividend-growth based test. In common implementations, with the AR parameter set equal to the corresponding OLS estimate, Cochrane's test suffers from severe size distortions.
|
|
| 20. |
- Hjalmarsson, Erik, 1975
(författare)
-
Does the Black- Scholes formula work for electricity markets? A nonparametric approach
- 2003
-
Rapport (övrigt vetenskapligt/konstnärligt)abstract
- Despite the high volatilities recorded for electricity prices, there seems to be little demand for options on electricity. One reason for the disinterest in electricity options could arise from uncertainty about how to price these options. This study uses recent econometric advances to nonparametrically estimate correct prices for electricity options and compare these to the Black-Scholes prices. The main finding is that although the nonparametric estimates deviate significantly from the Black-Scholes prices, it would be difficult to find an alternative parametric model that performs better. Thus, from a practical viewpoint, the Black-Scholes prices appear to be the best available.
|
|
| 21. |
|
|
| 22. |
|
|
| 23. |
- Hjalmarsson, Erik, 1975, et al.
(författare)
-
Heterogeneity in households' expectations of housing prices - evidence from micro data
- 2020
-
Ingår i: Journal of Housing Economics. - : Elsevier BV. - 1051-1377 .- 1096-0791. ; 50
-
Tidskriftsartikel (refereegranskat)abstract
- Expectations about future housing prices are arguably an important determinant of actual housing prices, and an important input in decisions on whether and how to transact in the housing market. Using micro-level survey data on Swedish households, we analyse households' expectations of housing prices and how these expectations relate to the characteristics of the respondents. Results show that age is found to be significantly related to housing-price expectations, with the youngest households - whose adulthood largely corresponds to the extended period of rapid housing-price growth in Sweden - having the highest housing-price expectations. This is consistent with the hypothesis that expectations are influenced by personal experiences. Our findings suggest that aggregate measures of expectations might hide important features of the data, which could be of interest to policy makers when choosing regulatory actions or formulating macroprudential policies.
|
|
| 24. |
|
|
| 25. |
|
|
