Verification of direct relation between unsystematic risk and return (by Drew et als (2006) and Fu (2009)) on the one hand and affirmation of reverse relation between idiosyncratic volatility and return by some academicians such as Ang etals (2006,2009) on the oth More
Verification of direct relation between unsystematic risk and return (by Drew et als (2006) and Fu (2009)) on the one hand and affirmation of reverse relation between idiosyncratic volatility and return by some academicians such as Ang etals (2006,2009) on the other hand, resulted in forming idiosyncratic risk puzzle. This research objective is to investigate the role of third and fourth moments as potential explanations for the idiosyncratic risk puzzle. So, a sample composed of 270 listed firms in Tehran Stock Exchange during 1378 to 1389 is investigated using portfolio approach and Fama-MacBeth (1973) model. Total used observations for these methods are more than 9000 firm-season.
The results confirm positive relation between skewness and return but do not show significant relation between kurtosis and stock return. The effect of skewness and kurtosis on the relation between idiosyncratic risk and return strongly is affected by considerations such as IVOL measure, mechanical rules for thin trading and weighting scheme of portfolio return. Nonetheless, because the lack of explicite theory about third and fourth moments pricing, it cannot impute the origin of return and unsystematic risk relation to skewness and kurtosis.
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This research investigates cross section individual stock return predictability by style return in Tehran Stock Exchange. Test of stock return predictability is performed based on Fama and Mac-Beth regression model using data from 1380 to 1389. Also for profound analysi More
This research investigates cross section individual stock return predictability by style return in Tehran Stock Exchange. Test of stock return predictability is performed based on Fama and Mac-Beth regression model using data from 1380 to 1389. Also for profound analysis, the relation between co-movement of stock return with its style return and momentum is examined. So, Portfolio analysis approach based on dual sorting is used for the latter test. The outcomes of this research confirm future cross-section stock return predictability by style-based return over twelve month formation period. The results indicate that co-movement of stock return with its style return generates variation in momentum profit. This finding is restricted to twelve month formation period and one month future return horizon and is not observed over longer horizon future return.
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Fama and French (2015) with the addition of two more elements - operating profitability and investment - developed their three-factor model and offered a new five-factor model. This study aimed to test the Fama-French five-factor model compared with the three-factor and More
Fama and French (2015) with the addition of two more elements - operating profitability and investment - developed their three-factor model and offered a new five-factor model. This study aimed to test the Fama-French five-factor model compared with the three-factor and four-factor models.
For this purpose, a sample of 184 companies listed in Tehran Stock Exchange during the years 1380 to 1393 is examined. For testing the model, Portfolio analysis and test of Gibbons et al (1989) is used.
The results of this study revealed that operating profitability and investment are able to explain the return of portfolio. Fama-French five-factor model explains the excess return better than other models in Tehran Stock Exchange. Then four-factor model in different portfolios, depending on the factors made them, have better performance than three-factor models.
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Sharp specified investment styles by four characteristics: (1) “identifiable before the fact” (2) “not easily beaten” (3) “a viable alternative” and (4) “low cost”. The paper is aimed to test mentioned four characteristics More
Sharp specified investment styles by four characteristics: (1) “identifiable before the fact” (2) “not easily beaten” (3) “a viable alternative” and (4) “low cost”. The paper is aimed to test mentioned four characteristics about liquidity in Tehran Stock Exchange (TSE). To this end, a sample composed of listed firms in TSE has been examined during 1379 to 1389. One and two-dimensional portfolio study approaches and regression analysis have been used to test above characteristics. According to research findings, Even though portfolios which have different liquidity level that allocated by turnover to meet “identifiable before the fact” condition but return of extreme portfolios based on liquidity is very low relative to other styles. The results do not confirm superior performance of investment strategy based on liquidity so “not easily beaten” characteristic for liquidity style is not verified in TSE. Nevertheless, it can beat the market by putting together liquidity and other investment styles. In accordance with research outcomes, liquidity does not have more information content than other investment styles so it is not taken into account “viable alternative”. Since half of stocks in portfolio based on liquidity are interchanged by rebalancing, so it cannot manage this strategy passively and “low cost” condition is not confirmed. Liquidity as risk factor also is not viable and is only liner combination of identified risk factors in other asset pricing models.
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