资产定价asset pricing.docx

资产定价asset pricing.docx

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资产定价assetpricing

AMultifactorApproachinUnderstanding

AssetPricingAnomalies

Anempiricalstudyofthefactormodelinthe

BudapestStockMarket

NaffaHelena

Spring2009

Budapest

TableofContents

TableofFigures3

Tables3

1Introduction3

2TheEfficientMarketHypothesis3

2.1Theory3

2.1.1WeakFormofEfficiency3

2.1.2Semi-StrongFormofEfficiency3

2.1.3StrongFormofEfficiency3

2.2TheHypothesisDefied3

2.3CapitalAssetPricingModel3

2.4AnAlternativeTheory:

ArbitragePricingTheory3

2.5RelationshipbetweentheCAPMandAPT3

2.6WhenTheoriesFail,AnomaliesPrevail3

2.6.1TheCalendarEffect3

2.6.2EarningsonBookEquity3

2.6.3P/EEffect3

2.6.4Small-FirmEffect3

2.6.5OverandUnderReactiontoEarnings3

2.6.6MeanReversion3

2.6.7TheMomentumEffect3

2.6.8OtherAnomalies3

2.7CausesoftheAnomalies3

3BehaviouralFinance3

4Anomalies:

PremiumorInefficiency3

4.1ATesttotheCAPM3

4.2MultipleFactors3

4.2.1MarketCapitalisationandtheValuePremium3

4.3ThreeFactorModelofFamaandFrench3

4.4CharacteristicsModelofDanielandTitman3

5EmpiricalFindingsoftheBudapestStockExchange3

5.1.1Calculatingbetaandmeanreturn3

5.1.2FormingPortfolios3

5.1.3TheFactors:

MarketPremium,SMBandHML3

5.1.4Fama’smodeltestedontheBudapestStockExchange3

6LimitationsoftheStudy3

7Conclusion3

References3

Appendix13

Appendix23

TableofFigures

Figure1:

Haugen’smonthlyreturnsforyears1927-20013

Figure2Meanrevertingandnon-meanrevertingbehaviour3

Figure3:

CAPMmeanexcessreturnsplottedagainstbeta.3

Figure6:

EmpiricalbetaforBUXcomponents3

Figure7:

ReutersbetaforBUXcomponents,calculationperiod5years3

Figure8:

Empiricalbeta（xaxis）graphedagainststockreturn（yaxis）3

Figure9:

Reutersbeta（xaxis）graphedagainststockreturn（yaxis）3

Figure10:

Meanexcessreturnsvs.marketbeta,varyingsizeandbook/marketratio3

Figure11:

Varyingsizewithinbook-to-marketequityratiogroups.3

Figure12:

Varyingbook-to-marketequityratiowithinsizegroups3

Figure13:

BUXyearlyreturnandthe3monthgovernmentbondyield3

Figure14:

Marketpremiumisshownbytheexcessreturnovertheriskfreerate.3

Tables

Table1:

Thefirstperiod’sregressionJanuary1991-December19973

Table2:

Thesecondperiod’sregressionJanuary1998–December20043

Table3:

SummaryStatisticsforMonthlyPercentThree-FactorExplanatoryReturns3

Table4:

RegressionResultsfortheCharacteristic-BalancedPortfolios3

Table5.Returnsofthe16BUXconstituentstocks3

Table6:

Stockreturns,betas3

Table7:

CorrelationmatrixofthefactorsHMLandSMB3

Table8:

GrangercausalitytestforthefactorsHMLandSMB3

Table9:

Summarytableofregressionofthe3factorsonthe23Hungarianshares3

“Whatisacynic?

Amanwhoknowsthepriceofeverything,andthevalueofnothing.”

OscarWilde–LadyWindermere’sFan

1Introduction

Ananomalyisusuallyadisorder,adeviationfromthenorm.Innaturalscience,ithasinducedresearcherstoformulatenewtheories.Infinancehowever,whatcouldnotbeexplainedbytraditionalassetpricingtheorieswashastilyarbitrated,andlaterlabelledananomaly.ThemultifactormodeldevisedbyFamaandFrenchontheotherhand,isquitesuccessfulinexplainingtheseanomalies,andtherefore,thenewtheoryisabletoincorporatethemintheirassetpricingformula.

Inmythesis,Iintroducethetopicofobservedabnormalmarketreturnsasbeingjustifiablepremiumsversussignifyingmarketinefficiencies.Thephenomenonofanomaliesisbestexplainedbyanamalgamofavailablefinancialliterature.Insuchanexplanation,theEfficientMarketHypothesisplaysacentralroleindefiningastandardforassetpricinginanidealworld.Iwillintroducethecapitalassetpricingmodelapproach.Incontrastwiththis,IdiscussanextendedmodeldevisedbyFamaofassetpricingthatincorporatesfactorsrelatingtotheanomaliesdiscussed.Thiswillfamiliarisethereaderwiththemethodologiesappliedbydifferenttheoriststotestthenewmodelagainsttraditionalapproaches.ThecriticsofthenewFamamodelrebukewithanapparentrationale:

thenewmodelisspecifictothesetofdataexaminedbyFama;thereforeitshighprecisioninforecastingassetreturnsisnotacoincidence.IshallattempttorevealtherelevanceofthemodeltotheHungarianmarket.MyapproachwillapplytheformulatotheemergingBudapestStockExchangesharesusinganun-ambitioustimeseriesfromSeptember2003tillSeptember,2008.

"I'dbeabuminthestreetwithatincupifthemarketswereefficient." 

WarrenBuffett

2TheEfficientMarketHypothesis

DespitetheabovequotefromWarrenBuffett,Iwithtostudyinformationalefficiencyinstockmarkets. Whenmarketsareefficient,theyworksmoothlywherebythepossessionofnewinformationcausesnoadded-value. Fromthisstemstheassumptioninfinancialmodelsthatadditionalinformationshouldcomeatnocost,asitisalreadyreflectedinprices. Itismuchorelikelytohavetransparentpricingforfinancialinstrumentstradedonstockmarketse.g.stocks,bonds,commodities. Butthematteroffactisthattheefficientmarkethypothesisfailsinpractice.Investmentstradedonthestockmarketbyfardonotrepresenttocompleteinvestmentportfolioavailabletoinvestors. Otherfinancialproductsareavailableondifferentplatforms,mostofwhicharelesstransparentthanstockmarkets. Theefficientmarkethypothesis（EMH）,however,makesassumptionsthatlimititsvaliditytoatheoreticalmarket. Amongsttheseassumptionsisthatalltransactionsaretransparent,whichmakespricingfair（unbiased）,astheyincorporateallavailableinformationincludingtheexpectationsofthemarketparticipantsofthefutureshapingofthemarket. Information,asdefinedbythetheory,isanythingthataffectspricesinawayunknowninthepresentappearingrandomlyinthefuture.Forthisreason,itisnotpossibletoconsistentlyoutperformthemarketbytakingadvantageofnewsthemarketalreadyknows,exceptwhenaninvestorislucky.

TheefficientmarkethypothesiswasfirstcoinedbyLouisBachelier,aFrenchmathematician.Inhis1900dissertation“ThéoriedelaSpéculation”he“beginsthemathematicalmodellingofstockpricemovementsandformulatestheprinciplethat‘theexpectationofthespeculatoriszero.’Obviously,heunderstandsherebyexpectationtheconditionalexpectationgiventhepastinformation.Inotherwords,heimplicitlyacceptsasanaxiomthatthemarketevaluatesassetsusingamartingalemeasure.”（Courtaultetal.2000p.343）Yethisworkwasoverlookedfordecadesuntilthemid1960swhenPaulSamuelsonstumbleduponthedissertationandsoonitbecameahottopicforfinancialeconomists.However,theefficientmarkettheoryowesitsrefineddetailstoProfessorEugeneFamaoftheUniversityofChicagoGraduateSchoolofBusiness. FamastartedtheformationofthetheoryasaPhD.dissertationandendedupasalife-longresearch.In1970hepublishedareviewofboththetheoryandtheevidenceforthehypothesis.Thepaperextendedandfine-tunedthetheory;inaddition,itincludedthedefinitionsforthreeformsofmarketefficiency:

theweak,thesemi-strongandthestrongformofmarketefficiency.

2.1Theory

Thetheoryassumesthatmarketparticipantsapartfrombeingutilitymaximising,alsohaverationalexpectations.Thisincludestheassumptionthateventhoughindividualsmaybewrong,thepopulationasawholeiscorrect;andthatpeopleadjusttheirexpectationsaccordingtonewinformation.Whenfacedwithnewinformation,someinvestorswilloverreactandotherswillunderreact.Insummery,reactionswillberandom,butwillhaveaconstantvolatility,andaknowndistributionfunction.Thus,theneteffectdoesnotallowforabnormalprofittoberealisedespeciallywhenconsideringtransactioncostsandspreads.

Famasaysthatanefficientmarketisonethatquicklyadjuststonewinformation.Itprevailsinmarketswhereprices“fullyreflect”availabledata.Thisconstitutestheimpossibilityofattaintingextraprofitsbytradingonthebasisofknowledgeofinformationalreadyincorporated.

Itmeansthatinitsstrongestform,thereshouldbenocostofinformation.Weknowthatthisinuntrue,andthatawholeindustryisbasedonsellinginformation.Thisiswhytheneedarisestofurtherdefineefficiencyofthemarkets.Thishastakentheform3levelsofinformationintegration;theweakformofefficiency,thesemi-strongformofefficiencyandthestrongformofefficiencyarediscussedbelow.

2.1.1WeakFormofEfficiency

Initsweakestform,theefficientmarkethypothesisassumesthatallhistoricalsharepricesarealreadyincorporatedintothepricingofassets.Therefore,noexcessprofitscanbeearnedbybasinginvestmentstrategiesonpastreturns.Thisimpliesthattechnicalanalysis,whichstudiesformationsinpastreturns,isuselessinpredictingthefuture.Sincepastperformanceisalreadyknowntothemarket,thecurrentsituationremainsunknown.Thisiswherefundamentalanalysisgainsattentionandmayberewardingforthosekeeninvestorswhodotheirhomeworkoncompanies’financialstatements.

Testsfortheweakformofefficiencyengageinhistoricaldataanalysisusingstatisticalandeconometricalmethods.Analysesconcerningmarketvalue,P/E,DIV/P,andbook-equity-to-market-equityinfluencesonpastdata,aswellastechnicalanalysisareprevalentinsuchtesting.

2.1.2Semi-StrongFormofEfficiency

Thelevelsofefficiencygraduallyincreasetheirrestrictions,soitisnaturalforthenextleveltoincludethepreviou