Showing papers in "Journal of Empirical Finance in 2008"

TL;DR: In this article, the authors propose to construct a studentized time series bootstrap confidence interval for the difference of the Sharpe ratios and declare the two ratios different if zero is not contained in the obtained interval.

TL;DR: In this paper, the authors test for the Random Walk Hypothesis (RWH) for seven stock markets in Gulf Cooperation Council (GCC) countries, and determine the effect of the correction for thin trading.

TL;DR: In this article, the zero-inflated beta model is used to analyze corporate capital structure decisions to demonstrate its applicability to the analysis of corporate capital-structure decisions.

TL;DR: This article used a bootstrap methodology to distinguish between "skill" and "luck" for individual funds and found that good performing funds demonstrate "bad skill" while poor performing funds exhibit "bad luck".

TL;DR: In this paper, the authors consider the most well-known risk aversion indicators and construct others with standard methods, and check if these indicators rise just before the crises and also if they are able to forecast crises.

TL;DR: In this paper, the authors calculate and evaluate quantile forecasts of the daily exchange rate returns of five currencies, including the Canadian dollar, and use the empirical distribution of predicted standardized returns with both rolling and recursive samples.

TL;DR: In this paper, the authors examine the impact of neglected heterogeneity on credit risk and show that neglecting heterogeneity in firm returns and/or default thresholds leads to under estimation of expected losses and its effect on portfolio risk is ambiguous.

TL;DR: In this paper, the authors investigate the impact of multiple directorships on corporate diversification and find that directors' busyness is inversely related to firm value, and that firms where board members hold more outside board seats suffer a deeper diversification discount.

TL;DR: In this paper, the authors investigate whether intraday technical analysis is profitable in the U.S. equity market and find that none of the 7846 popular technical trading rules are profitable after data snooping bias is taken into account.

TL;DR: In this paper, the authors compared trading and non-trading mechanisms for price discovery during the Nasdaq pre-open and examined whether prices discovered though non-Trading mechanisms are less efficient or reveal less information than prices discovered through trading.

TL;DR: In this article, the authors investigate the robustness of recent empirical results that indicate a breakdown in the correlation structure by deriving theoretical truncated and exceedance correlations using alternative distributional assumptions.

TL;DR: In this paper, boundedly rational and heterogeneous agent models have been developed and simulated returns are found to exhibit various stylized facts, such as volatility clustering and fat tails.

TL;DR: In this article, the authors investigate the excess comovement among 82 industry indexes in the U.S. stock market between January 5, 1976 and December 31, 2001 and show that the excess covariation between two assets beyond what can be explained by fundamental factors is statistically significant and represents an economically significant portion of the average gross square return correlation.

TL;DR: In this article, the S U -normal distribution was proposed to describe non-normality features embedded in financial time series, such as asymmetry and fat tails, and applied to the estimation of univariate and multivariate GARCH models.

TL;DR: In this article, a factor probit model is proposed for modeling and prediction of credit rating matrices that are assumed to be stochastic and driven by a latent factor, and the filtered latent factor path reveals the effect of the economic cycle on corporate credit ratings, and provides evidence in support of the PIT (point-in-time) rating philosophy.

TL;DR: In this paper, the authors examined two asymmetric stochastic volatility models used to describe the heavy tails and volatility dependencies found in most financial returns and found that the Student's t-distribution (ARSV-t) model provides a better fit than the MFSV model on the basis of Akaike information criterion (AIC) and the BIC.

TL;DR: In this paper, the authors examine a sample of 1179 Nasdaq IPOs and find that underpricing is positively correlated with the number of non-block institutional shareholders after IPO but negatively correlated with changes in the total number of shareholders.

TL;DR: In this article, the authors discuss the impact of different formulations of asset pricing models on the outcome of specification tests that are performed using excess returns and suggest that a modification of the traditional Hansen-Jagannathan distance (HJ-distance) is needed when we use the de-meaned factors.

TL;DR: In this article, the authors propose and empirically investigate a pricing model for convertible bonds based on Monte Carlo simulation, which uses parametric representations of the early exercise decisions and consists of two stages.

TL;DR: This paper examined investors' option activity on value and growth stocks before earnings announcements and found that unsophisticated investors enter option positions that load up on growth stocks relative to value stocks in the days leading up to earnings announcements.

TL;DR: In this article, the properties of three estimation methods for integrated volatility, i.e., realized volatility, Fourier, and wavelet estimation, when a typical sample of high-frequency data is observed, are compared in a simulation study which reveals a general robustness towards persistence or jumps in the latent stochastic volatility process.

TL;DR: This article analyzed investor sentiment in the US-dollar market and found that investor sentiment is associated with exchange rate returns at longer horizons, i.e. more than two years, whereas sentiment is cointegrated with fundamentals, whereas this relation becomes stronger, the larger exchange rate's misalignment from long run PPP.

TL;DR: This article proposed a model that relates transaction cost to characteristics of order flow and found that an unusual excess of buyers relative to sellers (buyers) tends to increase the ask (bid) price and that the ask and bid components of spread change asymmetrically about the efficient price.

TL;DR: In this article, the general bias-reducing technique of jackknifing was successfully applied to stock return predictability regressions, which can be applied to models with multiple predictors and overlapping observations.

TL;DR: In this article, the authors present a Markov chain Monte Carlo (MCMC) algorithm to estimate parameters and latent stochastic processes in the asymmetric Stochastic Volatility (SV) model, where the Box-Cox transformation of the squared volatility follows an autoregressive Gaussian distribution and the marginal density of asset returns has heavy-tails.

TL;DR: In this article, the consequences of using a GARCH filter on various mis-specified processes were investigated for Value-at-Risk and expected shortfall purposes using a two-step procedure, and it was shown that the McNeil and Frey (McNeil, A.J. and R. Frey, 2000, Estimation of Tail-Related Risk Measures for Heteroscedastic Financial Time Series: An Extreme Value Approach, Journal of Empirical Finance 7, 271-300.) two step procedure has very good forecasting properties.

TL;DR: In this paper, the authors examine the relationship between U.S. MNCs' valuation and corruption in countries where the MNC's foreign subsidiaries are located and uncover that country-level corruption has a multi-dimensional impact on MNC stocks' valuation, consistent with the view that lack of property rights protection and information asymmetry problems are more prevalent in corrupt environments.

TL;DR: In this paper, a new outward testing procedure was proposed to identify multiple outliers in heavy-tailed distributions, such as the distribution of stock returns, which are prone to generate large values and render difficult the detection of outliers.

TL;DR: The authors introduced a model-independent measure of aggregate idiosyncratic risk, which does not require estimation of market betas or correlations and is based on the concept of gain from portfolio diversification.

TL;DR: In this paper, the persistence of the forward premium can not be explained solely by the conditional variance of the spot rate, but rather by the long memory component of the risk premium.