Empirical-Evidence-on-Se課件

1、INVESTMENTS | BODIE, KANE, MARCUSCopyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCHAPTER 13Empirical Evidence on Security ReturnsINVESTMENTS | BODIE, KANE, MARCUSOverview of Investigation Return-beta relationships are widely used in actual financial practice. T

2、he CAPM predicts expected rates of return on assets, relative to a market portfolio of all risky assets.INVESTMENTS | BODIE, KANE, MARCUSOverview of Investigation A multifactor capital market usually is postulated. A broad market index (e.g. the S&P 500) represents one of the factors. Well diver

3、sified portfolios are often substituted for individual securities.To overcome CAPM testing difficulties:INVESTMENTS | BODIE, KANE, MARCUSThe Index Model and the Single-Factor APT Expected Return-Beta Relationship Estimating the SCL fMifirrErrEitftMtiiftiterrbrrINVESTMENTS | BODIE, KANE, MARCUSTests

4、of the CAPMTests of the expected return beta relationship: First Pass RegressionEstimate beta, average risk premiums and nonsystematic risk Second PassUse estimates from the first pass to see if model is supported by the data SML slope is “too flat” and intercept is “too high”.INVESTMENTS | BODIE, K

5、ANE, MARCUSSingle Factor Test ResultsReturn %BetaCAPMEstimated SMLINVESTMENTS | BODIE, KANE, MARCUSRolls Criticism The only testable hypothesis is whether the market portfolio is mean-variance efficient. Sample betas conform to the SML relationship because all samples contain an infinite number of e

6、x post mean-variance efficient portfolios. CAPM is not testable unless we know the exact composition of the true market portfolio and use it in the tests. Benchmark error due to proxy for MINVESTMENTS | BODIE, KANE, MARCUSMeasurement Error in Beta Problem: If beta is measured with error, then the sl

7、ope coefficient of the regression equation will be biased downward and the intercept biased upward. Solution: Replace individual assets with a set of portfolios with small nonsystematic components and widely spaced betas. Fama and MacBethINVESTMENTS | BODIE, KANE, MARCUSTable 13.1 Summary of Fama an

8、d MacBethINVESTMENTS | BODIE, KANE, MARCUSSummary of CAPM Tests1. Expected rates of return are linear and increase with beta, the measure of systematic risk.2. Expected rates of return are not affected by nonsystematic risk.INVESTMENTS | BODIE, KANE, MARCUSHuman Capital and Cyclical Variationsin Ass

9、et Betas Jagannathan and Wang study shows two important deficiencies in tests of the single-index model:1. Many assets are not traded, notably, human capital. A human capital factor may be important in explaining returns.2. Betas are cyclical.INVESTMENTS | BODIE, KANE, MARCUSTable 13.2 Evaluation of

10、 Various CAPM SpecificationsINVESTMENTS | BODIE, KANE, MARCUSTable 13.3 Determinants of StockholdingsINVESTMENTS | BODIE, KANE, MARCUSTests of the Multifactor Model Which factors or sources of risk should have risk premiums? CAPM and APT do not tell us!INVESTMENTS | BODIE, KANE, MARCUSTests of the M

11、ultifactor ModelChen, Roll and Ross 1986 StudyFactors Growth rate in industrial production Changes in expected inflation Unexpected inflation Unexpected changes in risk premiums on bonds Unexpected changes in term premium on bondsINVESTMENTS | BODIE, KANE, MARCUSStudy Structure & Results Method:

12、 Two-stage regression with portfolios constructed by size based on market value of equity Significant factors: industrial production, risk premium on bonds and unanticipated inflation Market index returns were not statistically significant in the multifactor modelINVESTMENTS | BODIE, KANE, MARCUSFam

13、a-French Three Factor Model Size and book-to-market ratios explain returns on securities. Smaller firms experience higher returns. High book to market firms experience higher returns (value style). Returns are explained by size, book to market and by beta.INVESTMENTS | BODIE, KANE, MARCUSInterpretat

14、ion of Three-Factor Model Size and value are priced risk factors, consistent with APT. Alternatively, premiums could be due to investor irrationality or behavioral biases.INVESTMENTS | BODIE, KANE, MARCUSRisk-Based InterpretationsLiew and Vassalou Style seems to predict GDP growth and relate to the

15、business cycle.Petkova and Zhang When the economy is expanding, value beta growth betaINVESTMENTS | BODIE, KANE, MARCUSFigure 13.1 Difference in Return to Factor PortfoliosINVESTMENTS | BODIE, KANE, MARCUSFigure 13.2 HML Beta in Different Economic StatesINVESTMENTS | BODIE, KANE, MARCUSBehavioral Ex

16、planations for Value Premium “Glamour firms” are characterized by recent good performance, high prices, and lower book-to-market ratios. High prices reflect excessive optimism plus overreaction and extrapolation of good news. Chan, Karceski and Lakonishok LaPorta, Lakonishok, Shleifer and VishnyINVE

17、STMENTS | BODIE, KANE, MARCUSFigure 13.3 The Book-to-Market RatioINVESTMENTS | BODIE, KANE, MARCUSFigure 13.4 Value minus Glamour Returns Surrounding Earnings AnnouncementsINVESTMENTS | BODIE, KANE, MARCUSMomentum: A Fourth Factor The original Fama-French model augmented with a momentum factor has b

18、ecome a common four-factor model used to evaluate abnormal performance of a stock portfolio. Momentum may be related to liquidity.INVESTMENTS | BODIE, KANE, MARCUSLiquidity and Asset Pricing Liquidity involves trading costs, ease of sale, necessary price concessions to effect a quick transaction, ma

19、rket depth, price predictability.INVESTMENTS | BODIE, KANE, MARCUSLiquidity and Asset Pricing Pstor and Stambaugh studied price reversals. Conclusion: Liquidity risk is a priced factor. Price reversals may occur when traders have to offer higher purchase prices or accept lower selling prices to comp

20、lete their trades in a timely manner.INVESTMENTS | BODIE, KANE, MARCUSLiquidity and Efficient Market Anomalies Pstor and Stambaugh suggest that the liquidity risk factor may account for the profitability of the momentum strategy. Sadka shows that the liquidity risk premium explains 40-80% of the abn

21、ormal returns to the momentum and postearnings announcement drift strategies.INVESTMENTS | BODIE, KANE, MARCUSEquity Premium PuzzleThe equity premium puzzle says :historical excess returns are too highand/or our usual estimates of risk aversion are too low.INVESTMENTS | BODIE, KANE, MARCUSConsumptio

22、n Growth and Market Rates of Return What matters to investors is not their wealth per se, but their lifetime flow of consumption. Measure risk as the covariance of returns with aggregate consumption.INVESTMENTS | BODIE, KANE, MARCUSConsumption Growth and Market Rates of Return The lower panel of Tab

23、le 13.6 shows:a high book-to-market ratio is associated with a higher consumption betalarger firm size is associated with a lower consumption beta.INVESTMENTS | BODIE, KANE, MARCUSTable 13.6 Annual Excess Returns and Consumption BetasINVESTMENTS | BODIE, KANE, MARCUSFigure 13.6 Cross-Section of Stoc

24、k Returns: Fama-French 25 Portfolios, 1954-2003INVESTMENTS | BODIE, KANE, MARCUSExpected versus Realized Returns Fama and French Found an equity premium only after 1949 Capital gains significantly exceeded the dividend growth rate in modern times. Equity premium may be due to unanticipated capital g

25、ains.INVESTMENTS | BODIE, KANE, MARCUSSurvivorship Bias Estimating risk premiums from the most successful country and ignoring evidence from stock markets that did not survive for the full sample period will impart an upward bias in estimates of expected returns. The high realized equity premium obt

26、ained for the United States may not be indicative of required returns.INVESTMENTS | BODIE, KANE, MARCUSLiquidity and the Equity Premium Puzzle Part of the equity premium is almost certainly compensation for liquidity risk rather than just the (systematic) volatility of returns. Ergo, the equity prem

27、ium puzzle may be less of a puzzle than it first appears.INVESTMENTS | BODIE, KANE, MARCUSBehavioral Explanations of the Equity Premium Puzzle Barberis and Huang explain the puzzle as an outcome of irrational investor behavior. The premium is the result of narrow framing and loss aversion. Investors

28、 ignore low correlation of stocks with other forms of wealth Higher risk premiums resultINVESTMENTS | BODIE, KANE, MARCUSCopyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin13-38CHAPTER 14Bond Prices and YieldsINVESTMENTS | BODIE, KANE, MARCUS13-39 Bonds are debt.

29、Issuers are borrowers and holders are creditors. The indenture is the contract between the issuer and the bondholder. The indenture gives the coupon rate, maturity date, and par value.Bond CharacteristicsINVESTMENTS | BODIE, KANE, MARCUS13-40 Face or par value is typically $1000; this is the princip

30、al repaid at maturity. The coupon rate determines the interest payment. Interest is usually paid semiannually. The coupon rate can be zero. Interest payments are called “coupon payments”.Bond CharacteristicsINVESTMENTS | BODIE, KANE, MARCUS13-41U.S. Treasury Bonds Bonds and notes may be purchased di

31、rectly from the Treasury. Denomination can be as small as $100, but $1,000 is more common. Bid price of 100:08 means 100 8/32 or $1002.50Note maturity is 1-10 yearsBond maturity is 10-30 yearsINVESTMENTS | BODIE, KANE, MARCUS13-42Corporate Bonds Callable bonds can be repurchased before the maturity

32、date. Convertible bonds can be exchanged for shares of the firms common stock. Puttable bonds give the bondholder the option to retire or extend the bond. Floating rate bonds have an adjustable coupon rateINVESTMENTS | BODIE, KANE, MARCUS13-43Preferred Stock Dividends are paid in perpetuity. Nonpaym

33、ent of dividends does not mean bankruptcy. Preferred dividends are paid before common. No tax break.EquityFixed incomeINVESTMENTS | BODIE, KANE, MARCUS13-44Innovation in the Bond Market Inverse Floaters Asset-Backed Bonds Catastrophe Bonds Indexed BondsTreasury Inflation Protected Securities (TIPS).

34、INVESTMENTS | BODIE, KANE, MARCUS13-45Table 14.1 Principal and Interest Payments for a Treasury Inflation Protected SecurityINVESTMENTS | BODIE, KANE, MARCUS13-461(1)(1)TTBttParValueCPrrPB =Price of the bondCt = interest or coupon paymentsT = number of periods to maturity r = semi-annual discount ra

35、te or the semi-annual yield to maturityBond PricingINVESTMENTS | BODIE, KANE, MARCUS13-47Price of a 30 year, 8% coupon bond.Market rate of interest is 10%. Example 14.2: Bond Pricing6060105. 11000$05. 140$Pricett71.810$Price INVESTMENTS | BODIE, KANE, MARCUS13-48 Prices and yields (required rates of

36、 return) have an inverse relationship The bond price curve (Figure 14.3) is convex. The longer the maturity, the more sensitive the bonds price to changes in market interest rates.Bond Prices and YieldsINVESTMENTS | BODIE, KANE, MARCUS13-49Figure 14.3 The Inverse Relationship Between Bond Prices and

37、 YieldsINVESTMENTS | BODIE, KANE, MARCUS13-50Table 14.2 Bond Prices at Different Interest RatesINVESTMENTS | BODIE, KANE, MARCUS13-51Yield to Maturity Interest rate that makes the present value of the bonds payments equal to its price is the YTM.Solve the bond formula for r1(1)(1)TTttBParValueCPrrIN

38、VESTMENTS | BODIE, KANE, MARCUS13-52Yield to Maturity Example)1 (1000)1 ($4076.1276$60601rrttSuppose an 8% coupon, 30 year bond is selling for $1276.76. What is its average rate of return?r = 3% per half yearBond equivalent yield = 6%EAR = (1.03)2)-1=6.09%INVESTMENTS | BODIE, KANE, MARCUS13-53YTM vs

39、. Current YieldYTM The YTM is the bonds internal rate of return. YTM is the interest rate that makes the present value of a bonds payments equal to its price. YTM assumes that all bond coupons can be reinvested at the YTM rate.Current Yield The current yield is the bonds annual coupon payment divide

40、d by the bond price. For bonds selling at a premium, coupon rate current yieldYTM. For discount bonds, relationships are reversed.INVESTMENTS | BODIE, KANE, MARCUS13-54Yield to Call If interest rates fall, price of straight bond can rise considerably. The price of the callable bond is flat over a ra

41、nge of low interest rates because the risk of repurchase or call is high. When interest rates are high, the risk of call is negligible and the values of the straight and the callable bond converge.INVESTMENTS | BODIE, KANE, MARCUS13-55Figure 14.4 Bond Prices: Callable and Straight DebtINVESTMENTS |

42、BODIE, KANE, MARCUS13-56Realized Yield versus YTM Reinvestment Assumptions Holding Period ReturnChanges in rates affect returnsReinvestment of coupon paymentsChange in price of the bondINVESTMENTS | BODIE, KANE, MARCUS13-57Figure 14.5 Growth of Invested FundsINVESTMENTS | BODIE, KANE, MARCUS13-58Fig

43、ure 14.6 Prices over Time of 30-Year Maturity, 6.5% Coupon BondsINVESTMENTS | BODIE, KANE, MARCUS13-59YTM vs. HPRYTM YTM is the average return if the bond is held to maturity. YTM depends on coupon rate, maturity, and par value. All of these are readily observable.HPR HPR is the rate of return over

44、a particular investment period. HPR depends on the bonds price at the end of the holding period, an unknown future value. HPR can only be forecasted.INVESTMENTS | BODIE, KANE, MARCUS13-60Figure 14.7 The Price of a 30-Year Zero-Coupon Bond over TimeINVESTMENTS | BODIE, KANE, MARCUS13-61 Rating compan

45、ies: Moodys Investor Service, Standard & Poors, Fitch Rating Categories Highest rating is AAA or Aaa Investment grade bonds are rated BBB or Baa and above Speculative grade/junk bonds have ratings below BBB or Baa. Default Risk and Bond PricingINVESTMENTS | BODIE, KANE, MARCUS13-62 Coverage rati

46、os Leverage ratios Liquidity ratios Profitability ratios Cash flow to debtFactors Used by Rating CompaniesINVESTMENTS | BODIE, KANE, MARCUS13-63Table 14.3 Financial Ratios and Default Risk by Rating Class, Long-Term DebtINVESTMENTS | BODIE, KANE, MARCUS13-64Figure 14.9 Discriminant AnalysisINVESTMEN

47、TS | BODIE, KANE, MARCUS13-65 Sinking funds a way to call bonds early Subordination of future debt restrict additional borrowing Dividend restrictions force firm to retain assets rather than paying them out to shareholders Collateral a particular asset bondholders receive if the firm defaultsProtection Against DefaultINVEST