SSRN Author: Scott MurrayScott Murray SSRN Content
http://www.ssrn.com/author=1146343
http://www.ssrn.com/rss/en-usTue, 15 Sep 2015 03:43:44 GMTeditor@ssrn.com (Editor)Tue, 15 Sep 2015 03:43:44 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0REVISION: Option Implied Volatility, Skewness, and Kurtosis and the Cross-Section of Expected Stock ReturnsMotivated by the nature of asset pricing models, we investigate the cross-sectional relation between the market's ex-ante view of a stock's risk and the stock's ex-ante expected return. We demonstrate that an ex-ante measure of expected returns based on analyst price targets is highly related to the market's required rate of return. Using this measure, we show that ex-ante measures of volatility, skewness, and kurtosis derived from option prices are positively related to ex-ante expected returns. We then decompose the risk measures into systematic and unsystematic components and find that while expected returns are related to both systematic and unsystematic variance risk, only the unsystematic components of skewness and kurtosis are important for explaining the cross-section of expected stock returns. The results are consistent using two different approaches to measuring ex-ante risk and robust to controls for other variables related to stock returns and analyst bias.
http://www.ssrn.com/abstract=2322945
http://www.ssrn.com/1424679.htmlTue, 01 Sep 2015 08:16:06 GMTREVISION: Betting against Beta or Demand for Lottery?The low (high) abnormal returns of stocks with high (low) beta, dubbed the betting against beta phenomenon, is the most persistent anomaly in empirical asset pricing research. This paper demonstrates that investors' demand for lottery-like stocks generates the betting against beta effect. Portfolio and regression analyses show that the betting against beta phenomenon disappears after controlling for lottery demand. The betting against beta phenomenon only exists when the price impact of lottery demand falls disproportionately on high-beta stocks and is concentrated in stocks with low levels of institutional ownership, a finding consistent with the lottery demand explanation. Factor models that include our lottery demand factor explain the abnormal returns associated with betting against beta. Finally, after controlling for lottery demand, portfolio and regression analyses detect a security market line slope that is significantly positive and insignificantly different from the ...
http://www.ssrn.com/abstract=2408146
http://www.ssrn.com/1418316.htmlSat, 08 Aug 2015 17:32:24 GMTREVISION: Betting against Beta or Demand for Lottery?The low (high) abnormal returns of stocks with high (low) beta is the most persistent anomaly in empirical asset pricing research. A recent study attributes this betting against beta phenomenon to funding liquidity risk. We provide evidence of an alternative explanation. Portfolio and regression analyses show that the betting against beta phenomenon disappears after controlling for what we find to be persistent lottery characteristics of the stocks in our sample, while other measures of firm characteristics and risk fail to explain the effect. Furthermore, the betting against beta phenomenon only exists when the price impact of lottery demand falls disproportionately on high-beta stocks. We also demonstrate that the betting against beta effect occurs only in stocks with low levels of institutional ownership, a finding consistent with the lottery-demand explanation but less easily explained by funding liquidity. Factor models that include our lottery demand factor explain the ...
http://www.ssrn.com/abstract=2408146
http://www.ssrn.com/1401974.htmlFri, 05 Jun 2015 05:32:40 GMTREVISION: Option Implied Volatility, Skewness, and Kurtosis and the Cross-Section of Expected Stock ReturnsMotivated by the nature of asset pricing models, we investigate the cross-sectional relation between the market's ex-ante view of a stock's risk and the stock's ex-ante expected return. We demonstrate that an ex-ante measure of expected returns based on analyst price targets is highly related to the market's required rate of return. Using this measure, we show that ex-ante measures of volatility, skewness, and kurtosis derived from option prices are positively related to ex-ante expected returns. We then decompose the risk measures into systematic and unsystematic components and find that while expected returns are related to both systematic and unsystematic variance risk, only the unsystematic components of skewness and kurtosis are important for explaining the cross-section of expected stock returns. The results are consistent using two different approaches to measuring ex-ante risk and robust to controls for other variables related to stock returns and analyst bias.
http://www.ssrn.com/abstract=2322945
http://www.ssrn.com/1363965.htmlSat, 10 Jan 2015 12:42:43 GMTREVISION: Betting against Beta or Demand for LotteryThe low (high) abnormal returns of stocks with high (low) beta is the most persistent anomaly in empirical asset pricing research. A recent study attributes this betting against beta phenomenon to funding liquidity risk. We provide evidence of an alternative explanation. Portfolio and regression analyses show that the betting against beta phenomenon disappears after controlling for what we find to be persistent lottery characteristics of the stocks in our sample, while other measures of firm characteristics and risk fail to explain the effect. Furthermore, the betting against beta phenomenon only exists when the price impact of lottery demand falls disproportionately on high-beta stocks. We also demonstrate that the betting against beta effect occurs only in stocks with low levels of institutional ownership, a finding consistent with the lottery-demand explanation but less easily explained by funding liquidity. Finally, factor models that include our lottery demand factor ...
http://www.ssrn.com/abstract=2408146
http://www.ssrn.com/1360153.htmlSat, 20 Dec 2014 08:01:10 GMTREVISION: Analyst Price Target Expected Returns and Option Implied RiskMotivated by the nature of asset pricing models, we investigate the cross-sectional relation between the market's ex-ante view of a stock's risk and the stock's ex-ante expected return. We demonstrate that an ex-ante measure of expected returns based on analyst price targets is highly related to the market's required rate of return. Using this measure, we show that ex-ante measures of volatility, skewness, and kurtosis derived from option prices are positively related to ex-ante expected returns. We then decompose the risk measures into systematic and unsystematic components and find that while expected returns are related to both systematic and unsystematic variance risk, only the unsystematic components of skewness and kurtosis are important for explaining the cross-section of expected stock returns. The results are consistent using two different approaches to measuring ex-ante risk and robust to controls for other variables related to stock returns and analyst bias.
http://www.ssrn.com/abstract=2516937
http://www.ssrn.com/1359522.htmlWed, 17 Dec 2014 17:00:45 GMTREVISION: Analyst Price Target Expected Returns and Option Implied RiskMotivated by the nature of asset pricing models, we investigate the cross-sectional relation between the market's ex-ante view of a stock's risk and the stock's ex-ante expected return. We demonstrate that an ex-ante measure of expected returns based on analyst price targets is highly related to the market's required rate of return. Using this measure, we show that ex-ante measures of volatility, skewness, and kurtosis derived from option prices are positively related to ex-ante expected returns. We then decompose the risk measures into systematic and unsystematic components and find that while expected returns are related to both systematic and unsystematic variance risk, only the unsystematic components of skewness and kurtosis are important for explaining the cross-section of expected stock returns. The results are consistent using two different approaches to measuring ex-ante risk and robust to controls for other variables related to stock returns and analyst bias.
http://www.ssrn.com/abstract=2516937
http://www.ssrn.com/1348493.htmlTue, 04 Nov 2014 13:05:59 GMTREVISION: Analyst Price Target Expected Returns and Option Implied RiskMotivated by the nature of asset pricing models, we investigate the cross-sectional relation between the market's ex-ante view of a stock's risk and the stock's ex-ante expected return. We demonstrate that an ex-ante measure of expected returns based on analyst price targets is highly related to the market's required rate of return. Using this measure, we show that ex-ante measures of volatility, skewness, and kurtosis derived from option prices are positively related to ex-ante expected returns. We then decompose the risk measures into systematic and unsystematic components and find that while expected returns are related to both systematic and unsystematic variance risk, only the unsystematic components of skewness and kurtosis are important for explaining the cross-section of expected stock returns. The results are consistent using two different approaches to measuring ex-ante risk and robust to controls for other variables related to stock returns and analyst bias.
http://www.ssrn.com/abstract=2516937
http://www.ssrn.com/1347735.htmlSat, 01 Nov 2014 10:04:33 GMT