| dc.contributor |
Abhyankar, Abhay |
|
| dc.creator |
Wang, Y |
|
| dc.date |
2022-08-30T10:13:57Z |
|
| dc.date |
2022-08-08 |
|
| dc.date |
2022-08-28T15:45:27Z |
|
| dc.date |
2022-08-30T10:13:57Z |
|
| dc.date.accessioned |
2023-02-23T12:15:59Z |
|
| dc.date.available |
2023-02-23T12:15:59Z |
|
| dc.identifier |
http://hdl.handle.net/10871/130594 |
|
| dc.identifier.uri |
http://localhost:8080/xmlui/handle/CUHPOERS/258605 |
|
| dc.description |
Return predictability has always been an interesting topic and discussed on the academic
front. In this thesis, we first study the correlation between return predictability and firm level liquidity. We find that the illiquid firm commands higher excess return. Next, we
study the return forecasting ability of the short interest ratio. We find that Rapach et al.
(2016) conclusions have certain limitations, and the forecasting ability cannot last more
than one year. In addition, we confirm that highly shorted stocks perform slightly worse
than the stocks with smaller short positions. Finally, we find that information flow impacts
a company’s liquidity volatility and trading volume after the SEC introduces the EDGAR
system.
Chapter 2 contributes to the related literature by studying the cross-sectional relation
between Amihud (2002) illiquidity measure and expected stock returns using the latest
stock data and studying the effect of Regulation Fair Disclosure (Reg FD) implementation
on stock-level illiquidity. This chapter focuses on the most commonly used measure, the
Amihud (2002). We find that illiquidity has a solid positive cross-sectional relation with
future stock returns, which is that illiquid securities command higher expected returns
than more liquid securities. Regardless of whether illiquidity is measured using one, three,
six, or twelve months of historical data. Reg FD’s implementation positively impacts the
firms’ liquidity, especially for small firms. After the implementation, the policy mandates
the small firms to establish a sound system and reduce selective disclosure, resulting in a
liquidity improvement.
In chapter 3, we study the predictability of the aggregate short interest from the econo metrics and economics views by employing new detrending methods and the tests for
dynamic predictive regressions to avoid the unit root. From the econometrics angle, the
short interest index (SII) that Rapach et al. (2016) build is not stationary and has a unit root.
There is an upward trend in this series. Thus the analysis results obtained by incorporating
this series are spurious and not reliable. From the economic angle, the highly shorted stocks
consistently underperform the lightly shorted stocks. The lightly shorted portfolio, in which
the SIR is less than 2.5% comprises approximate 80% of the listed firms over the market.
We doubt the predictive power of SIR could be driven by a small number of firms reporting
high short interest. The extremely high SIR value will magnify the predictive power of the
aggregated short interest because the number of firms with high SIR constitutes a small
percent over the entire market.
In chapter 4, we exploit the quasi-natural experiment created by the roll-out of the EDGAR
system to study the causal impact of the additional flow of stock-specific information on
firms. We find that this information flow to investors results in statistically significant and
economically essential changes in illiquidity and trading volume but not in idiosyncratic
volatility. Across firms, illiquidity falls for the smallest firms more than it does for the
largest firms. Across industry groups, the mining and manufacturing sectors have the
largest decreases in illiquidity and increases in trading volume. |
|
| dc.publisher |
University of Exeter |
|
| dc.publisher |
Department of Finance and Accounting |
|
| dc.rights |
2024-02-28 |
|
| dc.rights |
http://www.rioxx.net/licenses/all-rights-reserved |
|
| dc.subject |
Illiquidity and asset pricing, Return predictability, Event study and Regulation Fair disclosure, Equity premium, Stock excess returns, Short interest Predictability, EDGAR, information flow, liquidity, volume, volatility |
|
| dc.title |
Essays in Empirical Asset Pricing |
|
| dc.type |
Thesis or dissertation |
|
| dc.type |
PhD in finance |
|
| dc.type |
Doctoral |
|
| dc.type |
Doctoral Thesis |
|