News

Seminar (Dept. of Finance)

Copyfrom:Dept. of Finance Time:2020-10-20

Theme:Fundamental Factor Premiums

Speaker:Erica Xuenan Li(Cheung Kong Graduate School of Business)

Time:2020-10-23 10:00

Address:Zoom APP

Language:English

 

Zoom APP

https://zoom.com.cn/j/62032642531?pwd=cXJOd0h3T1BIMGloV3h1cmc5Rll6dz09

ID:620 3264 2531

Password:314245

 

ABSTRACT: 

This paper quantifies to what extent factor premiums in stock market are driven by firm fundamentals. We estimate the parameters of a 2-capital q-model (Congalves, Xue and Zhang, 2019) by matching the entire time series of stock returns at firm level using Bayesian Markov Chain Monte Carlo (MCMC), instead of matching the average anomaly returns as prior studies (Liu, Whited and Zhang, 2009; Congalves, Xue and Zhang, 2019) do. Our paper resolves the critique of the prior studies that the parameter values of the model are chosen to fit a specific set of anomalies and different values are required for different anomalies. Because factor premiums are not the moment conditions of our estimation, our methodology provides a true test on the capability of the q-theory in explaining anomalies. We show that the model is able to generate sizable premiums for Momentum, ROE, Asset growth, New share issuance, Investment, ROA, gross profitability, Size, R&D, and Advertising premiums. However, the model is unable to generate Value and Accrual premiums. 

 

SHORT BIOGRAPHY: 

Erica Xuenan Li is Associate Professor of Finance at Cheung Kong Graduate School of Business. She received her PhD in Finance from University of Rochester and PhD in Physics from University of Massachusetts, Amherst. Her research interest is theoretical corporate finance and asset pricing and the macro-finance. Her work has been published in leading academic journals including Journal of Financial Economics, Review of Financial Studies, Journal of Monetary Economics, and Management Science. Before joining CKGSB, Professor Li was Assistant Professor at the Ross school of business of University of Michigan at Ann Arbor.


 

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