Browsing by Subject "Capital assets pricing model"
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Item An investigation into the efficacy of beta as a risk discriminator in public utilities(Texas Tech University, 1981-05) Bigbee, Dalton LeeNot availableItem Asset pricing dynamics in a fragile economy: theory and evidence(2004) Yoeli, Uziel; Chapman, David A.; Titman, SheridanEconomic fragility affects not only the level of asset prices, but also the conditional moments of asset returns. This dissertation models a fragile economy that ìbreaksî when productivity drops below a certain threshold. The anticipated time of this break plays an important role in determining conditional asset prices. The result is that (i) asset prices vary through time even if dividend levels are constant, and (ii) the equity premium and volatility are higher than in an equivalent exchange economy. Calibrating the model shows that asset prices exhibit an equity premium, volatility, and time-series predictability that are all consistent with the empirical observations. I compare the empirical implications of conditional moments of asset returns to other variables that have been used to predict either conditional excess returns or conditional volatility, and find that the theory presented here results in variables with stronger predictive power.Item Impact of regulatory risk on capital structure decisions for electric utilities: a theoretical and empirical analysis(Texas Tech University, 1985-12) Rao, Ramesh PillarisettiNot availableItem Is there conditional mean reversion in stock returns?(Texas Tech University, 1998-05) Ho, Chia-ChengIn this dissertation, market efficiency means that stock prices fully reflect available information. In this sense, in order to claim that the stock market is efficient, we must know the true available information and the correct equilibrium price (return) model used in setting the stock price. This is in fact a very strong requirement which makes it virtually impossible to test for market efficiency, for in the real world we do not know the true available information and the true equilibrium price model. Therefore, all we can do in testing for market efficiency is to investigate whether or not for a given proposed equilibrium price model, the behavior of the observed stock price complies with the observed market information. Market efficiency has been one of the most important research topics in finance for the past several decades. Early empirical research seems to support the efficient markets hypothesis to a large extent. However, since the late 1970s, the assertion that the stock market is efficient has come under serious attack. No unanimous conclusion on market efficiency has been reached so far. The primary goal of this research is not to resolve the dispute over market efficiency but to develop a test to examine market efficiency from a new perspective.Item Misspecification of capital asset pricing model (CAPM): implication for size and book-to-market effects(Texas Tech University, 1999-05) Lin, Chien-TingSince the pioneering work of Markowitz (1952) in the normative portfolio selection and the development of Capital Asset Pricing Model (CAPM) by Sharpe (1964). Lintner (1965) and Mossin (1966), a vast amount of empirical work has been done to verify or refute this model. Initial empirical tests such as those by Black, Jensen and Scholes (1972) and Fama and Macbeth (1973, 1974) have focused on the intercept, slope and the linear relationship between a security's expected retum and its beta. Although some support is found for the model in that no significant nonlinearities and unsystematic risk exist, it does not validate the theoretical relationship because the slope of beta estimates tend to be flatter and the intercept higher (i.e., Black's zero beta concept) than the model predicts.Item The benchmark error problem and international asset pricing: an empirical examination(Texas Tech University, 1999-12) Perrina, Virginio MarioNot availableItem The detection and consequences of beta nonstationarity(Texas Tech University, 1986-12) Howe, Thomas StanleyThe development of return-generating models, some of which rely on beta, has provided a means of examining the abnormal performance of stock returns around the time of an event. One of the problems in using such models is that beta is apparently nonstationary. This study uses simulated daily stock returns to examine the ability of the cumulative sum of the squared recursive residuals (CSRR) and the Quandt log-likelihood ratio (QLLR) to identify a given level of beta change and the effect of a given level of beta change on the results of abnormal returns tests. This study also uses daily stock returns surrounding the listing and delisting of the firms' bonds on Standard and Poor's "CreditWatch" to examine the nature of capital asset pricing model (CAPM) parameter nonstationarity and the effect of allowing for CAPM parameter nonstationarity on abnormal returns test results for these firms. Analysis of the simulated security returns suggests that, given the range of error variances generally found in daily stock returns, the CSRR and QLLR show little ability to identify even a sudden 50 percent beta change and are highly sensitive to outliers. This low power appears not to present a problem. Even a 50 percent sudden beta change leaves the rejection frequencies and average p-values of the abnormal returns tests and the average abnormal return and mean square error of the CAPM regressions largely unchanged. In the CreditWatch samples, the CSRR indicates parameter nonstationarity for nearly every security over a 4-year period. Comparison of the CSRR results with the results of traditional parameter nonstationarity tests suggests that the significant CSRR findings are more often associated with heteroscedasticity or outliers than with a beta change. In the CreditWatch section, the cumulative average residuals appear sensitive to the periods used in estimating the CAPM parameters and the method used to allow for the apparent parameter nonstationarity. This sensitivity is apparently due primarily to instability in the alpha estimates.Item The detection and consequences of beta nonstationarity(Texas Tech University, 1986-12) Howe, Thomas StanleyNot available