Risks in Financial Markets

Bibliographic Details
Main Author:	Pai, Yu-Jou
Language:	English
Published:	University of Cincinnati / OhioLINK 2020
Subjects:	Business Administration Consumption-based Capital Asset Pricing Model Variances REITs Conditional Equity Premium Anomalies Real-Time Data
Online Access:	http://rave.ohiolink.edu/etdc/view?acc_num=ucin1584003500272517

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spelling	ndltd-OhioLink-oai-etd.ohiolink.edu-ucin15840035002725172021-08-03T07:13:57Z Risks in Financial Markets Pai, Yu-Jou Business Administration Consumption-based Capital Asset Pricing Model Variances REITs Conditional Equity Premium Anomalies Real-Time Data Risk plays a central role in financial markets. Households and companies adjust their consumption and investment behaviors, respectively, when facing risk. Financial markets then react to the adjustments accordingly. Whereas a positive risk-return relation is the first fundamental law of finance, however, empirical evidence does not always support such implication. My dissertation focuses on identifying the disagreements between existing asset-pricing theories and empirical evidence, and proposing new explanations that reconcile the disagreements. Essay 1 studies how aggregate consumption responds to macroeconomic shocks. Essay 2 shows how the revisions in aggregate consumption estimates affect the measure of asset prices. Essay 3 demonstrates how financial constraints affect corporate payout and investment policies.Essay 1: Leading consumption-based asset-pricing models have two major implications: First, investors expect higher future stock market returns when the expected stock market volatility increases. Second, stock market prices decrease monotonically with stock market volatility. Neither implication, however, is supported by data. In the first essay, I introduce a consumption-based model featuring two, fear and euphoria, variances to jointly explain the unstable relation between stock market variance and return, and between stock market variance and price. I also present empirical evidence that supports the model implications.Essay 2: We document novel empirical support for the CCAPM. Real-time consumption has significant explanatory power for the cross-section of expected stock returns, while previous studies have found elusive results using revised latest-vintage data. We also lends support to Kroencke’s (2017) conjecture that the Bureau of Economic Analysis filters consumption data by showing that it does so gradually through revisions. The revised data perform poorly in the CCAPM estimation because they are heavily filtered and contain substantial measurement errors. GDP and industrial production have similar asset pricing information and become insignificant when we control for real-time consumption.Essay 3: This study investigates whether firm dividend payout choices are influenced by the presence of a Dividend Reinvestment Plan (DRIP). Given that DRIPs help retain capital, we show that dividend-paying firms with a DRIP will tend to pay a high dividend and maintain a stable payout policy. Using a multinomial logistic model, we show that in comparison to REITs without DRIPs, REITs with DRIPs have a higher payout ratio and are less likely to: (1) pay regular dividends with extra dividends and share repurchases, (2) distribute extra dividends, repurchase shares, yet omit regular dividends and (3) omit all payouts. In addition, we find that REITs with a capital-retaining DRIP invest more aggressively and such increased investment activities are undertaken without raising the reliance on external financing. 2020-06-02 English text University of Cincinnati / OhioLINK http://rave.ohiolink.edu/etdc/view?acc_num=ucin1584003500272517 http://rave.ohiolink.edu/etdc/view?acc_num=ucin1584003500272517 unrestricted This thesis or dissertation is protected by copyright: some rights reserved. It is licensed for use under a Creative Commons license. Specific terms and permissions are available from this document's record in the OhioLINK ETD Center.
collection	NDLTD
language	English
sources	NDLTD
topic	Business Administration Consumption-based Capital Asset Pricing Model Variances REITs Conditional Equity Premium Anomalies Real-Time Data
spellingShingle	Business Administration Consumption-based Capital Asset Pricing Model Variances REITs Conditional Equity Premium Anomalies Real-Time Data Pai, Yu-Jou Risks in Financial Markets
author	Pai, Yu-Jou
author_facet	Pai, Yu-Jou
author_sort	Pai, Yu-Jou
title	Risks in Financial Markets
title_short	Risks in Financial Markets
title_full	Risks in Financial Markets
title_fullStr	Risks in Financial Markets
title_full_unstemmed	Risks in Financial Markets
title_sort	risks in financial markets
publisher	University of Cincinnati / OhioLINK
publishDate	2020
url	http://rave.ohiolink.edu/etdc/view?acc_num=ucin1584003500272517
work_keys_str_mv	AT paiyujou risksinfinancialmarkets
_version_	1719457067655233536

Risks in Financial Markets

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