SSRN Author: Scott MurrayScott Murray SSRN Content
http://www.ssrn.com/author=1146343
http://www.ssrn.com/rss/en-usWed, 03 Sep 2014 01:20:20 GMTeditor@ssrn.com (Editor)Wed, 03 Sep 2014 01:20:20 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0REVISION: Betting Against Beta or Demand for LotteryFrazzini and Pedersen (2014) document that a betting against beta strategy that takes long positions in low-beta stocks and short positions in high-beta stocks generates a large abnormal return of 6.6% per year and they attribute this phenomenon to funding liquidity risk. We find strong confirmation of their results on U.S. equity data, but provide evidence of an alternative explanation. Portfolio and regression analyses show that the betting against beta phenomenon disappears after controlling for the 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 find that this lottery characteristic aggregates at the portfolio level and therefore cannot be diversified away. Finally, factor models that include our lottery demand factor explain the ...
http://www.ssrn.com/abstract=2408146
http://www.ssrn.com/1332422.htmlTue, 02 Sep 2014 14:16:25 GMTREVISION: Betting Against Beta or Demand for LotteryFrazzini and Pedersen (2014) document that a betting against beta strategy that takes long positions in low-beta stocks and short positions in high-beta stocks generates a large abnormal return of 6.6% per year and they attribute this phenomenon to funding liquidity risk. We find strong confirmation of their results on U.S. equity data, but find evidence of an alternative explanation. Portfolio and regression analyses show that the betting against beta phenomenon disappears after controlling for lottery characteristics of 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 find that this lottery characteristic aggregates at the portfolio level and therefore cannot be diversified away. Finally, factor models that include our lottery-demand factor explain the abnormal returns ...
http://www.ssrn.com/abstract=2408146
http://www.ssrn.com/1329567.htmlSat, 23 Aug 2014 15:24:55 GMTREVISION: Betting Against Beta or Demand for LotteryFrazzini and Pedersen (2014) document that a betting against beta strategy that takes long positions in low-beta stocks and short positions in high-beta stocks generates a large abnormal return of 6.6% per year and they attribute this phenomenon to funding liquidity risk. We demonstrate that price pressure driven by demand for lottery-like stocks, not funding liquidity risk, generates the betting against beta phenomenon. Portfolio and regression analyses show that, after controlling for lottery demand, the betting against beta phenomenon disappears, while other variables, including measures of funding liquidity 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. Finally, factor models that include our lottery-demand factor explain the abnormal returns of the betting against beta portfolio as well as the betting against beta factor generated by Frazzini ...
http://www.ssrn.com/abstract=2408146
http://www.ssrn.com/1318414.htmlSat, 12 Jul 2014 06:15:33 GMTREVISION: Betting Against Beta or Demand for LotteryFrazzini and Pedersen (2014) document that a betting against beta strategy that takes long positions in low-beta stocks and short positions in high-beta stocks generates a large abnormal return of 6.6% per year and they attribute this phenomenon to funding liquidity risk. We demonstrate that price pressure driven by demand for lottery-like stocks, not funding liquidity risk, generates the betting against beta phenomenon. Portfolio and regression analyses show that, after controlling for lottery demand, the betting against beta phenomenon disappears, while other variables, including measures of funding liquidity 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. Finally, factor models that include our lottery-demand factor explain the abnormal returns of the betting against beta portfolio as well as the betting against beta factor generated by Frazzini ...
http://www.ssrn.com/abstract=2408146
http://www.ssrn.com/1318054.htmlThu, 10 Jul 2014 17:23:36 GMTREVISION: Betting Against Beta or Demand for LotteryFrazzini and Pedersen (2014) document that a betting against beta strategy that takes long positions in low-beta stocks and short positions in high-beta stocks generates a large abnormal return of 6.6% per year and they attribute this phenomenon to funding liquidity risk. We demonstrate that price pressure driven by demand for lottery-like stocks, not funding liquidity risk, generates the betting against beta phenomenon. Portfolio and regression analyses show that, after controlling for lottery demand, the betting against beta phenomenon disappears, while other variables, including measures of funding liquidity 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. Finally, factor models that include our lottery-demand factor explain the abnormal returns of the betting against beta portfolio as well as the betting against beta factor generated by Frazzini ...
http://www.ssrn.com/abstract=2408146
http://www.ssrn.com/1315407.htmlSat, 28 Jun 2014 14:24:53 GMTREVISION: Betting Against Beta or Demand for LotteryFrazzini and Pedersen (2014) document that a betting against beta strategy that takes long positions in low-beta stocks and short positions in high-beta stocks generates a large abnormal return of 6.6% per year and they attribute this phenomenon to funding liquidity risk. We demonstrate that price pressure driven by demand for lottery-like stocks, not funding liquidity risk, generates the betting against beta phenomenon. Portfolio and regression analyses show that, after controlling for lottery demand, the betting against beta phenomenon disappears, while other variables, including measures of funding liquidity 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. Finally, factor models that include our lottery-demand factor explain the abnormal returns of the betting against beta portfolio as well as the betting against beta factor generated by Frazzini ...
http://www.ssrn.com/abstract=2408146
http://www.ssrn.com/1311861.htmlFri, 13 Jun 2014 07:22:38 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. The results hold for both the systematic and unsystematic components of the stock's risk. Defining the volatility, skewness, and kurtosis risk premia as the differences between the risk-neutral and physical moments, we also find that each of these risk premia is positively related to expected 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/1309342.htmlMon, 02 Jun 2014 11:16:54 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. The results hold for both the systematic and unsystematic components of the stock's risk. Defining the volatility, skewness, and kurtosis risk premia as the differences between the risk-neutral and physical moments, we also find that each of these risk premia is positively related to expected 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/1294747.htmlTue, 01 Apr 2014 15:07:08 GMTREVISION: Betting Against Beta or Demand for LotteryFrazzini and Pedersen (2014) document that a betting against beta strategy that takes long (short) positions in low (high) beta stocks generates large abnormal returns of 6.6% per year, and attribute this phenomenon to funding liquidity risk. We investigate alternative explanations for this effect, and find that it is caused by demand for lottery-like assets, a behavioral phenomenon. Requiring betting against beta portfolios to be neutral to lottery demand eliminates the abnormal returns. Controlling for lottery-demand, multivariate analyses detect a theoretically consistent positive relation between beta and returns. Factor models that include our lottery-demand factor explain the abnormal returns of betting against beta portfolios. We conclude that the betting against beta phenomenon is driven by demand for lottery-like stocks.
http://www.ssrn.com/abstract=2408146
http://www.ssrn.com/1289400.htmlThu, 13 Mar 2014 16:25:47 GMTNew: The Information Content of Option Prices Regarding Future Stock Return Serial CorrelationI investigate the relation between option prices and daily stock return serial correlation. I demonstrate that the variance ratio, calculated as the ratio of realized to implied stock return variance, has both a contemporaneous and predictive relation with stock return serial correlation. The ability of the variance ratio to predict future stock return serial correlation gives rise to a daily trading strategy that implements reversal trading on stocks predicted to exhibit large negative serial correlation and momentum trading on stocks with high predicted serial correlation. The trading strategy generates risk-adjusted returns in excess of 6.5% per year.
http://www.ssrn.com/abstract=2384985
http://www.ssrn.com/1275765.htmlSun, 26 Jan 2014 20:35:42 GMTREVISION: Option Implied Volatility, Skewness, and Kurtosis and the Cross-Section of Expected Stock ReturnsWe investigate the cross-sectional relation between the market's ex-ante view of the volatility, skewness, and kurtosis of the risk-neutral distribution implied from option prices, and ex-ante expected stock returns, calculated from analyst price targets. We find that ex-ante expected returns are strongly positively related to each of the total risk-neutral moments (volatility, skewness, and kurtosis). We then decompose each of the risk-neutral moments into systematic and unsystematic components. The results show that both the systematic and unsystematic portions of variance, skewness, and kurtosis are positively related to ex-ante expected returns. Defining the volatility, skewness, and kurtosis risk premia as the difference between the risk-neutral and physical moments, we also demonstrate that each of these risk premia is positively related to expected returns. The results are consistent using two different approaches to measuring risk-neutral moments and robust to controls ...
http://www.ssrn.com/abstract=2322945
http://www.ssrn.com/1255699.htmlTue, 05 Nov 2013 16:28:01 GMTREVISION: Option Implied Volatility, Skewness, and Kurtosis and the Cross-Section of Expected Stock ReturnsWe investigate the cross-sectional relation between the market's ex-ante view of the volatility, skewness, and kurtosis of the risk-neutral distribution implied from option prices, and ex-ante expected stock returns, calculated from analyst price targets. We find that ex-ante expected returns are strongly positively related to each of the total risk-neutral moments (volatility, skewness, and kurtosis). We then decompose each of the risk-neutral moments into systematic and unsystematic components. The results show that both the systematic and unsystematic portions of variance, skewness, and kurtosis are positively related to ex-ante expected returns. Defining the volatility, skewness, and kurtosis risk premia as the difference between the risk-neutral and physical moments, we also demonstrate that each of these risk premia is positively related to expected returns. The results are consistent using two different approaches to measuring risk-neutral moments and robust to controls ...
http://www.ssrn.com/abstract=2322945
http://www.ssrn.com/1254357.htmlThu, 31 Oct 2013 14:25:43 GMTREVISION: Option Implied Volatility, Skewness, and Kurtosis and the Cross-Section of Expected Stock ReturnsWe investigate the cross-sectional relation between the market's ex-ante view of the volatility, skewness, and kurtosis of the risk-neutral distribution implied from option prices, and ex-ante expected stock returns, calculated from analyst price targets. We find that ex-ante expected returns are strongly positively related to each of the total risk-neutral moments (volatility, skewness, and kurtosis). We then decompose each of the risk-neutral moments into systematic and unsystematic components. The results show that both the systematic and unsystematic portions of variance, skewness, and kurtosis are positively related to ex-ante expected returns. Defining the volatility, skewness, and kurtosis risk premia as the difference between the risk-neutral and physical moments, we also demonstrate that each of these risk premia is positively related to expected returns. The results are consistent using two different approaches to measuring risk-neutral moments and robust to controls ...
http://www.ssrn.com/abstract=2322945
http://www.ssrn.com/1253942.htmlWed, 30 Oct 2013 12:45:00 GMTREVISION: Option Implied Volatility, Skewness, and Kurtosis and the Cross-Section of Expected Stock ReturnsWe investigate the cross-sectional relation between the market's ex-ante view of the volatility, skewness, and kurtosis of the risk-neutral distribution implied from option prices, and ex-ante expected stock returns, calculated from analyst price targets. We find that ex-ante expected returns are strongly positively related to each of the total risk-neutral moments (volatility, skewness, and kurtosis). We then decompose each of the risk-neutral moments into systematic and unsystematic components. The results show that both the systematic and unsystematic portions of variance, skewness, and kurtosis are positively related to ex-ante expected returns. Defining the volatility, skewness, and kurtosis risk premia as the difference between the risk-neutral and physical moments, we also demonstrate that each of these risk premia is positively related to expected returns. The results are consistent using two different approaches to measuring risk-neutral moments and robust to controls ...
http://www.ssrn.com/abstract=2322945
http://www.ssrn.com/1244198.htmlThu, 26 Sep 2013 11:09:46 GMTREVISION: Option Implied Volatility, Skewness, and Kurtosis and the Cross-Section of Expected Stock ReturnsWe investigate the cross-sectional relation between the market's ex-ante view of the volatility, skewness, and kurtosis of the risk-neutral distribution implied from option prices, and ex-ante expected stock returns, calculated from analyst price targets. We find that ex-ante expected returns are strongly positively related to each of the total risk-neutral moments (volatility, skewness, and kurtosis). We then decompose each of the risk-neutral moments into systematic and unsystematic componen
http://www.ssrn.com/abstract=2322945
http://www.ssrn.com/1239455.htmlMon, 09 Sep 2013 21:05:22 GMT