Trading probability and turnover as measures of liquidity risk: evidence from the U.K. stock market

Author(s):

Stephen Thomas

Industry:
Banking

This paper utilises monthly data from the U.K. stock market to examine possible regularities in variables (trading probability and fractional turnover) which may be (or may be hypothesised to be) associated with liquidity risk. Modelling is based upon extensions to the CAPM involving variables closely similar to those employed in the Fama-French three factor model (albeit using Dividend Yield in place of the Book to Market ratio). Our findings suggest that the measure of trading probability used here is a close substitute for the market capitalisation measure associated with the 'Size' effect; and that the fractional turnover variable makes a significant contribution as an addendum to a three factor model.

Updated: 31/05/2012
Comments:
Views: 3,747

Does risk seeking drive asset prices? A stochastic dominance analysis of aggregate investor preferences

Author(s):

Thierry Post

 et al.
Topic:
Finance
Industry:
Banking

We investigate whether risk seeking or non-concave utility functions can help to explain the cross-sectional pattern of stock returns.

Updated: 27/10/2011
Comments:
Views: 3,662

Downside risk aversion, fixed income exposure, and the value premium puzzle

The value premium substantially reduces for downside risk averse investors with a substantial fixed income exposure, such as insurance companies and pension funds.

Updated: 22/09/2011
Comments:
Views: 5,350

Loss aversion with a state-dependent reference point

Author(s):

Thierry Post

This study investigates loss aversion when the reference point is state-dependent. Using a state-dependent structure, prospects are more attractive if they depend positively on the reference point and are less attractive in case of negative dependence.

Updated: 27/10/2011
Comments:
Views: 4,155

Does risk seeking drive asset prices? A stochastic dominance analysis of aggregate investor preferences

We investigate whether risk seeking or non-concave utility functions can help to explainthe cross-sectional pattern of stock returns.

Updated: 13/10/2011
Comments:
Views: 4,360

A mixing model for operational risk

Author(s):

Jens Nielsen

 et al.

External data can often be useful in improving estimation of operational risk loss distributions. This paper develops a systematic approach that incorporates external information into internal loss distribution modelling.

Updated: 22/09/2011
Comments:
Views: 4,388

Combining underreported internal and external data for operational risk measurement

Author(s):

Jens Nielsen

 et al.

This paper proposes a model for operational losses that improves the internal loss distribution modelling by combining internal and external operational risk data. It also considers the possibility that internal and external data have been collected with a different truncation threshold.

Updated: 22/09/2011
Comments:
Views: 4,773

An empirical test on leverage and stock returns

Author(s):

Gulnur Muradoglu

Topic:
Finance
Industry:
Banking

This is an empirical study that investigates the effect of firm's leverage on stock returns. We start with the explicit valuation model of Modigliani and Miller (1958) and expand the model further to test the relation between stock returns and firms' leverage.

Updated: 22/09/2011
Comments:
Views: 5,863

Apples and pears: the comparison of risk capital and required return in financial institutions

Risk capital is the contribution of an exposure to the default risk of a financial institution.

Updated: 22/09/2011
Comments:
Views: 4,368