Essays on the Cross-section of Returns
Author | : Woo Hwa Koh |
Publisher | : |
Total Pages | : 103 |
Release | : 2015 |
ISBN-10 | : OCLC:930181045 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Essays on the Cross-section of Returns written by Woo Hwa Koh and published by . This book was released on 2015 with total page 103 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines what factors determine the cross-section of returns. It contains three chapters. Chapter 1 investigates whether uncertainty shocks can explain the value premium puzzle. Intuitively, the value of growth options increases when uncertainty is high. As a result, growth stocks hedge against uncertainty risk and earn lower risk premiums than value stocks. An investment-based asset pricing model augmented with time-varying uncertainty accounts for both the value premium and the empirical failure of the capital asset pricing model (CAPM). This study also shows that uncertainty shocks influence cross-sectional investment. Uncertainty has a negative impact on the investment of value firms, while it has a positive impact on the investment of growth firms.