THE ROLE OF CONDITIONAL HETEROSKEDASTICITY IN IDENTIFYING AND ESTIMATING LINEAR TRIANGULAR SYSTEMS, WITH APPLICATIONS TO ASSET PRICING MODELS THAT INCLUDE A MISMEASURED FACTOR

2013 ◽  
Vol 29 (5) ◽  
pp. 800-824 ◽  
Author(s):  
Todd Prono
Keyword(s):  
Asset Pricing ◽  
Conditional Heteroskedasticity ◽  
Pricing Models ◽  
Asset Pricing Models ◽  
Triangular Systems

Models or Stars: The Role of Asset Pricing Models and Heuristics in Investor Risk Adjustment

2020 ◽  
Vol 34 (1) ◽  
pp. 67-107 ◽  
Author(s):  
Richard B Evans ◽  
Yang Sun
Keyword(s):  
Asset Pricing ◽  
Risk Adjustment ◽  
Factor Models ◽  
Strongly Correlated ◽  
Pricing Models ◽  
Asset Pricing Models ◽  
Retail Investors ◽  
Before And After ◽  
Sector Funds

Abstract We examine the role of factor models and simple performance heuristics in investor decision-making using Morningstar’s 2002 rating methodology change. Before the change, flows strongly correlated with CAPM alphas. After, when funds are ranked by size and book-to-market groups, flows become more sensitive to 3-factor alphas (FF3). Flows to a matched institutional sample (same managers/strategies) follow FF3 before and after the change but are unrelated to the CAPM. Placebo tests with sector funds and other factor loadings show no effects. Our results imply that improvements in simple performance heuristics can result in more sophisticated risk adjustment by retail investors.

The role of sorting portfolios in asset-pricing models

2011 ◽  
Vol 21 (18) ◽  
pp. 1381-1396 ◽  
Author(s):  
J. Ernstberger ◽  
H. Haupt ◽  
O. Vogler
Keyword(s):  
Asset Pricing ◽  
Pricing Models ◽  
Asset Pricing Models

Short- and Long-Horizon Behavioral Anomalies and Institutional Investors’ Nudge Behavior: Based on the Data of Listed Chinese Tobacco Companies

2021 ◽  
Vol 7 (5) ◽  
pp. 1904-1922
Author(s):  
Liu Yue ◽  
Liu Tianming
Keyword(s):  
Asset Pricing ◽  
Institutional Investors ◽  
Regulatory Agencies ◽  
Pricing Models ◽  
Healthy Development ◽  
Limits To Arbitrage ◽  
Asset Pricing Models ◽  
Pricing Factors ◽  
The Impact

We use the data of listed tobacco companies in China to study the existence of short- and long-horizon behavioral anomalies and the impact of institutional investors’ behavior on them. We found that the existing asset pricing models cannot explain the short- and long-horizon behavioral anomalies based on tobacco enterprise data. Conversely, the short- and long-horizon behavioral anomalies can explain the exciting asset pricing factors. Compared with existing asset pricing models, behavioral anomalies have a stronger ability to explain anomalies. Behavioral anomalies could pass the cross-sectionally test and strengthened over time. The above results indicate that behavioral anomalies exist in China tobacco enterprisest significantly and are time-varying. We found that the limits to arbitrage and cognitive bias lead to the existence of behavioral anomalies through mechanism tests. Institutional investors did not play the role of price discovery. Instead, their nudge behavior strengthens the short- and long-horizon behavioral anomalies. Therefore, tobacco regulatory agencies should guide listed tobacco companies to broaden information channels to reduce information asymmetry in the market through relevant policies, strengthen the supervision of institutional investors’ bubble riding behavior, and promote the healthy development of the tobacco market.

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