Accruals, cash flows, and operating profitability in the cross section
... profitability factor contains more information than the combination of the accruals and operating
Sloan (1996) shows that the accrual component of earnings is less persistent than the cash flow
component. He posits that the accrual anomaly arises because investors do not unde ...
... Calculates the accrued interest of a security that has periodic payments.
Calculates the accrued interest of a security that pays interest at maturity.
Returns the depreciation for each accounting period by using a depreciation coefficient
Returns the depreciation for each accounting period
Generating South African Volatility Surface
... Traders say volatilities are “skewed” when options of a given asset trade at increasing or decreasing levels of implied volatility as you move through the strikes. The
volatility skew (smile) was first observed and mentioned by Black and Scholes in a
paper that appeared in 1972 [BS 72]. It was then ...
Volatility Markets Consistent modeling, hedging and practical
... these models, a parsimonious description of the dynamics of both the stock price and its instantaneous variance is the starting point. Such a model is based on “structural” assumptions
on the underlying stock price. For example, Heston’s popular model [H93] assumes that the
instantaneous variance of ...
Earnings Surprises, Growth Expectations, and Stock
... between growth and value stocks is the same regardless of the sign of the earnings
surprise. Thus, this table presents exactly the relation that would be expected if the two
effects are completely unrelated. The table in figure 2 (a) contains the abnormal return
behavior predicted by Basu (1977) and ...
Earnings Seasonality and Stock Returns
... The nature of the earnings seasonality measure makes it unlikely that these returns are
driven by seasonal firms having different fixed loadings on risk factors. In the first place, the
portfolio of highly seasonal firms does not show higher volatility than the portfolio of negative
seasonal firms. ...
Scotia Dividend Fund
... Suitability. Before purchasing a Scotia Dividend Fund GIC you should
consider its suitability in relation to your investment objectives.
Rate of return. The return payable, if any, is based on the performance of
the Scotia Canadian Dividend Fund, which is a mutual fund. Mutual Funds
have, in the pas ...
Asset Liquidity and Stock Liquidity
... to measuring asset liquidity is similar to that of Berger and Bouwman (2009).
Using this approach we come up with 4 alternative measures of asset liquidity
that vary based on the liquidity scores assigned to the different assets.
In our 1st set of tests we estimate the time-series and cross-sectiona ...
Strategic IPOs and product market competition
... Finally, shares of all publicly traded ﬁrms are inﬁnitely
divisible, and all investors are able to borrow and lend at
the risk-free rate, rf. Under these assumptions, each investor maximizes expected utility by holding a certain combination of the risk-free asset and the market portfolio, and
the ex ...
Mind the gap: the arms length principle and MNE value
... Multinational enterprises (MNEs) operating by way of wholly owned subsidiaries are responsible for an
increasing percentage of global trade. This paper looks at how the existing rules based on the arm’s
length principle allocate a MNE’s profit between the taxing jurisdictions in which it operates. I ...
Sentiment Dynamics and Stock Returns: The Case of
... information beyond the informational content of past and contemporaneous
stock prices and returns themselves.
This is also in harmony with the theoretical arguments laid out above as
predictability of the noise component would evoke straightforward arbitrage
arguments. Using sentiment data and retur ...
High Idiosyncratic Volatility and Low Returns
... and is also observed in the larger sample of 23 developed markets. Second and perhaps most interesting, the negative spread in returns between stocks with high and low idiosyncratic volatility in international markets strongly comoves with the difference in returns between U.S. stocks
with high and ...
Entropy Measures in Finance and Risk Neutral Densities
... EPT Framework
Consider a risky asset on time interval [0, T ].
Let YT be asset price process of ST at future time T .
G as state space, a subset of real line R, g ST the probability densities on P
H g the index of market uncertainty about YT .
The H g is defined on the set of ...
The Misguided Beliefs of Financial Advisors
... These behavioral patterns have been studied extensively. See, for example, Nofsinger and Sias (1999), Grinblatt
and Keloharju (2001b), Barber and Odean (2008), and Kaniel, Saar, and Titman (2008) for analyses of how investors
trade in response to past price movements; Odean (1999), Barber and Odean ...
Modern portfolio theory
Modern portfolio theory (MPT) is a theory of finance that attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets. Although MPT is widely used in practice in the financial industry and several of its creators won a Nobel memorial prize for the theory, in recent years the basic assumptions of MPT have been widely challenged by fields such as behavioral economics.MPT is a mathematical formulation of the concept of diversification in investing, with the aim of selecting a collection of investment assets that has lower overall risk than any other combination of assets with the same expected return. This is possible, intuitively speaking, because different types of assets sometimes change in value in opposite directions. For example, to the extent prices in the stock market move differently from prices in the bond market, a combination of both types of assets can in theory generate lower overall risk than either individually. Diversification can lower risk even if assets' returns are positively correlated.More technically, MPT models an asset's return as a normally or elliptically distributed random variable, defines risk as the standard deviation of return, and models a portfolio as a weighted combination of assets, so that the return of a portfolio is the weighted combination of the assets' returns. By combining different assets whose returns are not perfectly positively correlated, MPT seeks to reduce the total variance of the portfolio return. MPT also assumes that investors are rational and markets are efficient.MPT was developed in the 1950s through the early 1970s and was considered an important advance in the mathematical modeling of finance. Since then, some theoretical and practical criticisms have been leveled against it. These include evidence that financial returns do not follow a normal distribution or indeed any symmetric distribution, and that correlations between asset classes are not fixed but can vary depending on external events (especially in crises). Further, there remains evidence that investors are not rational and markets may not be efficient. Finally, the low volatility anomaly conflicts with CAPM's trade-off assumption of higher risk for higher return. It states that a portfolio consisting of low volatility equities (like blue chip stocks) reaps higher risk-adjusted returns than a portfolio with high volatility equities (like illiquid penny stocks). A study conducted by Myron Scholes, Michael Jensen, and Fischer Black in 1972 suggests that the relationship between return and beta might be flat or even negatively correlated.