Advanced Search
MyIDEAS: Login to save this paper or follow this series

On pricing kernels, information and risk

Contents:

Author Info

  • D. L. Wilcox
  • T. J. Gebbie
Registered author(s):

    Abstract

    We discuss the finding that cross-sectional characteristic based models have yielded portfolios with higher excess monthly returns but lower risk than their arbitrage pricing theory counterparts in an analysis of equity returns of stocks listed on the JSE. Under the assumption of general no-arbitrage conditions, we argue that evidence in favour of characteristic based pricing implies that information is more likely assimilated by means of nonlinear pricing kernels for the markets considered.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://arxiv.org/pdf/1310.4067
    File Function: Latest version
    Download Restriction: no

    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number 1310.4067.

    as in new window
    Length:
    Date of creation: Oct 2013
    Date of revision: Oct 2013
    Handle: RePEc:arx:papers:1310.4067

    Contact details of provider:
    Web page: http://arxiv.org/

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, Econometric Society, vol. 41(5), pages 867-87, September.
    2. Chernov, Mikhail, 2003. "Empirical reverse engineering of the pricing kernel," Journal of Econometrics, Elsevier, Elsevier, vol. 116(1-2), pages 329-364.
    3. Fama, Eugene F & French, Kenneth R, 1995. " Size and Book-to-Market Factors in Earnings and Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 50(1), pages 131-55, March.
    4. Fama, Eugene F & French, Kenneth R, 1996. " Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, American Finance Association, vol. 51(1), pages 55-84, March.
    5. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411.
    6. Kent Daniel & Sheridan Titman, 1996. "Evidence on the Characteristics of Cross Sectional Variation in Stock Returns," NBER Working Papers 5604, National Bureau of Economic Research, Inc.
    7. Nawalkha, Sanjay K., 1997. "A multibeta representation theorem for linear asset pricing theories," Journal of Financial Economics, Elsevier, Elsevier, vol. 46(3), pages 357-381, December.
    8. Robert Fernholz & Ioannis Karatzas, 2006. "The implied liquidity premium for equities," Annals of Finance, Springer, Springer, vol. 2(1), pages 87-99, January.
    9. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 47(2), pages 427-65, June.
    10. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, American Finance Association, vol. 19(3), pages 425-442, 09.
    11. Keith Jefferis & Graham Smith, 2005. "The Changing Efficiency Of African Stock Markets," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 73(1), pages 54-67, 03.
    12. Roll, Richard & Ross, Stephen A, 1994. " On the Cross-sectional Relation between Expected Returns and Betas," Journal of Finance, American Finance Association, American Finance Association, vol. 49(1), pages 101-21, March.
    13. Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert W, 1994. " Contrarian Investment, Extrapolation, and Risk," Journal of Finance, American Finance Association, American Finance Association, vol. 49(5), pages 1541-78, December.
    14. Diane Wilcox & Tim Gebbie, 2008. "Serial Correlation, Periodicity And Scaling Of Eigenmodes In An Emerging Market," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 11(07), pages 739-760.
    15. Kent Daniel, 2001. "Explaining the Cross-Section of Stock Returns in Japan: Factors or Characteristics?," Journal of Finance, American Finance Association, American Finance Association, vol. 56(2), pages 743-766, 04.
    16. Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, Elsevier, vol. 13(3), pages 341-360, December.
    17. Wayne E. Ferson & Campbell R. Harvey, 1999. "Conditioning Variables and the Cross Section of Stock Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 54(4), pages 1325-1360, 08.
    18. Wilcox, Diane & Gebbie, Tim, 2004. "On the analysis of cross-correlations in South African market data," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 344(1), pages 294-298.
    19. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, Elsevier, vol. 33(1), pages 3-56, February.
    20. Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, Elsevier, vol. 20(3), pages 381-408, June.
    21. Harrison, J. Michael & Pliska, Stanley R., 1981. "Martingales and stochastic integrals in the theory of continuous trading," Stochastic Processes and their Applications, Elsevier, Elsevier, vol. 11(3), pages 215-260, August.
    22. Cox, John C. & Ross, Stephen A., 1976. "The valuation of options for alternative stochastic processes," Journal of Financial Economics, Elsevier, Elsevier, vol. 3(1-2), pages 145-166.
    23. Banz, Rolf W., 1981. "The relationship between return and market value of common stocks," Journal of Financial Economics, Elsevier, Elsevier, vol. 9(1), pages 3-18, March.
    24. Black, Fischer, 1972. "Capital Market Equilibrium with Restricted Borrowing," The Journal of Business, University of Chicago Press, vol. 45(3), pages 444-55, July.
    25. Bansal, Ravi & Viswanathan, S, 1993. " No Arbitrage and Arbitrage Pricing: A New Approach," Journal of Finance, American Finance Association, American Finance Association, vol. 48(4), pages 1231-62, September.
    26. Ball, Ray, 1978. "Anomalies in relationships between securities' yields and yield-surrogates," Journal of Financial Economics, Elsevier, Elsevier, vol. 6(2-3), pages 103-126.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:arx:papers:1310.4067. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.