This article aims to study if merge event can make abnormal return by setting up a merge-arbitrage investment portfolio; and if this abnormal return to be affected by taking consideration of related costs. During the period of merge event, the results from both CAPM model and Fama-French model show that the abnormal return from the merge-arbitrage investment portfolio is quite significant if not considering the direct and indirect costs; but the return will become insignificant if considering all the costs. However, there is no co-relation between merge-arbitrage investment portfolio and stock market investment portfolio, no matter if we have taken the costs into consideration or not. The relationship between the two investments is in linear regression. Furthermore, although size and market-to-book ratio are positively and negatively, respectively, related to the portfolio return, these relationships are statistically insignificant.

Initial public offerings (IPOs), especially common stock IPOs have drawn a lot of investors' and researchers' attentions for their short-run return rocketing phenomenon. Numerous articles focused on examining IPOs' short- and long-run return structures in various methods and conclusions have been published. Ibbotson (1975), Ibbotson, Sindelar, and Ritter (1988) and Loughran, Ritter, and Rydqvist (1994) focused on examining whether IPOs did possess initial abnormal return, while Ritter (1991), Brav and Gompers (1997) and Eckbo and Norli (2005) contributed their efforts on explaining IPOs' long-run return structures. This thesis extended Eckbo and Norli's (2005) study. I applied their model in examining Taiwan OTC IPOs' long-run (5 years) return structures. The samples are dated from 1991 to 2002, a total of 261 IPOs (financial service companies excluded) are examined. I formed a portfolio which buys each IPO with offering prices in the first day of trading and sells them with closing prices on the trading day 5 years later. The equal-weighted returns are calculated and served as the daily raw return of the portfolio. I used the Fama-French three factor model (size, book-to-market, RMRf) as the foundation, adding 2 factors (liquidity and leverage ratio) to the model and applying it to the samples. The outcomes are indicating that if the initial return was excluded and the portfolio return was calculated as the raw return minus risk-free return, the three-factor model displayed statistically significant factor loadings on size and RMRf factors while the intercept is significant as well. After adding liquidity and leverage ratio factors, all the factors in the model are significantly different from zero. The adjusted R-square values of the three- and five-factor models are 24.68% and 28.09%, respectively.

This project describes the underlying principles of Modern Portfolio Theory (MPT), the Capital Asset Pricing Model (CAPM), and multi-factor models in detail. It also explores the process of constructing optimal portfolios using Modern Portfolio Theory, as well as estimates the expected return and covariance matrix of assets using the CAPM and multi-factor models. Finally, the project applies these models in real markets to analyze our portfolios and compare their performances.

This diploma thesis is based on the theory of behavioral attention and examines the effect of the search for negative words in conjunction with the name of the bank on the price and on the yield of the shares of these banks. As a sample, 12 global, publicly traded and significant banks were selected. In this work, the behavioral attention is identified as the level of search on Google. The panel regression with random effects is used in the work, and Bayesian Model Averaging is used to identify suitable variables. The data proves the effect of negative behavioral attention, when an increased level of attention diminishes yield and share price. The results are then subjected to a robustness analysis where the impact of behavioral attention is examined before, during, and after the financial crisis. Furthermore, the effect of regulation and the level of behavioral attention itself is examined. The diploma thesis corresponds to the knowledge of behavioral economics and confirms a certain irrational behavior of investors on the market.

This thesis deals with the description and testing of the capital market models. It consists of an analysis of the most famous models such as the CAPM, the three-factor Fama-French model, the four-factor Fama-French-Carhart model and an alternative multi-factor model that includes the current relevant risk factors. In the first part, one can find the introduction to the capital market theory that is essential for the definition of model assumptions. The second part is dedicated to the description and construction of the models in reference to the relevant research papers. The last part of this thesis contains the regression model estimates, taking into account the data set of the fifteen most profitable IT companies. A portfolio of these firms is expected to exhibit a positive and statistically significant alpha. Daily portfolio returns in the period 1990 -- 2014 are regressed on risk factors of particular models. The aim of this thesis is to test whether the capital market models are valid for the long-term portfolio returns composed of the selected shares.

In my Senior Thesis, I explore the growth of socially responsible investing (SRI) practices in U.S. equity markets and abnormal sin stocks returns. I analyze the historical performance of socially responsible ETFs and portfolios of current sin stocks—alcohol, tobacco, gaming, and aerospace & defense stocks. I propose that as socially responsible investing practices continue to grow in U.S. equity markets, more industries will eventually be deemed sinful—such as sugary beverages, fast food/sugary food, biotech & pharmaceuticals, and tech/social media. I examine two sinful industries—alcohol and tobacco—by comparing the performance of these sinful portfolios before and after their industries were widely perceived as sinful. I explored these topics for a few key reasons. First, socially responsible investing practices in U.S. equity markets have exploded in popularity over the last decade. Every year, we see increasing amounts of money screened for environmental, social and governance (ESG) factors. Despite its increase in popularity, many people have claimed that socially responsible investing isn’t financially responsible investing—it underperforms as compared to common benchmarks such as the S&P 500. On the other hand, existing literature has supported the claim that investing in sin stocks generates abnormal returns for investors. I hypothesize that these two areas of portfolio management are connected—as socially responsible investing practices continue to grow, more industries will eventually be widely perceived as sinful. If the sin stock anomaly does exist and portfolios of sin stocks do generate abnormal returns, individuals and institutions can benefit from an immediate and long term investment strategy by investing in these “future” sinful industries now. Using three distinct capital asset pricing models—the Fama-French 3 Factor Model, the Fama-French 3 Factor Model plus Momentum, and the Fama-French 5 Factor Model—I come to four main conclusions. First, investing in socially responsible ETFs does not generate positive abnormal returns; in some instances, it generates statistically significant negative abnormal returns. Second, across the Fama-French 3 Factor Model, the Fama-French 3 Factor Model plus Momentum, and the Fama-French 5 Factor Model, portfolios of sin stocks from 1977-2018 generate statistically significant positive abnormal returns. Third, during the same time horizon, portfolios of future sin stocks exhibit similar levels of abnormal returns, especially portfolios of biotech & pharmaceutical stocks and portfolios of tech/social media stocks. Finally, portfolios of alcohol and tobacco stocks generated statistically significant abnormal returns after being widely perceived as sinful as compared to before they were widely perceived as sinful. My research has implications for practicing portfolio managers. First, socially responsible investing isn’t financially responsible investing. Second, portfolio managers should consider how the growth of socially responsible investing practices will impact perceptions of what is sinful. Anticipating which industries will become sinful can yield a profitable investment strategy. Third, I promote a profitable investment strategy in the short- and long-term time horizon. The results are clear: go long on sin and short on SRI.

<p>Denna studie undersöker hur förvärvande företags långsiktiga aktieavkastning påverkas av att förvärva andra företag. Vilket betalningsmedel som används vid förvärvet och storleken på det förvärvande företaget är faktorer vars inverkan på avkastningen efter förvärv testas. I studiepopulationen ingår 20 förvärv som genomförts under åren 1999-2005. Genom en kvantitativ undersökningsmetod insamlas data för aktieavkastning för dessa 20 företag och förväntad avkastning skattas med hjälp av Fama-Frenchs trefaktormodell. Därefter genomförs statistiska hypotestest som jämför förväntad avkastning med faktisk avkastning för den månad som infaller två år efter att förvärvet genomförts. Resultaten tyder på att företagen ger en lägre genomsnittlig avkastning än den förväntade, men dessa resultat har inte kunnat beläggas med statistisk signifikans.</p> / <p>This study examines how stock returns of acquiring firms are affected by the acquiring of other firms. The means of payment and the size of the acquiring firm are elements whose impacts on stock returns are studied. Included in the study population are 20 mergers and acquisitions that took place during the years of 1999-2005. Using a quantitative research method, the author collects stock returns for the included firms and expected stock returns are estimated using the Fama-French Three Factor Model. Subsequently, statistical hypothesis tests are performed that compare expected returns to actual returns for the particular month occurring two years after each acquisition has been implemented. The results indicate that the firms on average generate lower actual returns than expected returns. However, these results have not been found statistically significant.</p>

Denna studie undersöker hur förvärvande företags långsiktiga aktieavkastning påverkas av att förvärva andra företag. Vilket betalningsmedel som används vid förvärvet och storleken på det förvärvande företaget är faktorer vars inverkan på avkastningen efter förvärv testas. I studiepopulationen ingår 20 förvärv som genomförts under åren 1999-2005. Genom en kvantitativ undersökningsmetod insamlas data för aktieavkastning för dessa 20 företag och förväntad avkastning skattas med hjälp av Fama-Frenchs trefaktormodell. Därefter genomförs statistiska hypotestest som jämför förväntad avkastning med faktisk avkastning för den månad som infaller två år efter att förvärvet genomförts. Resultaten tyder på att företagen ger en lägre genomsnittlig avkastning än den förväntade, men dessa resultat har inte kunnat beläggas med statistisk signifikans. / This study examines how stock returns of acquiring firms are affected by the acquiring of other firms. The means of payment and the size of the acquiring firm are elements whose impacts on stock returns are studied. Included in the study population are 20 mergers and acquisitions that took place during the years of 1999-2005. Using a quantitative research method, the author collects stock returns for the included firms and expected stock returns are estimated using the Fama-French Three Factor Model. Subsequently, statistical hypothesis tests are performed that compare expected returns to actual returns for the particular month occurring two years after each acquisition has been implemented. The results indicate that the firms on average generate lower actual returns than expected returns. However, these results have not been found statistically significant.

Following the model developed by Easley, Kiefer, O¡¦Hara and Paperman (1996), I estimated the probability of informed trading (PI) in the TSEC. The result in my study is that the probability of informed trading is highly related with the trading volume of each stock. More active stocks will have lower probability of informed trading, so investors trading with active stocks will face less information asymmetry. Feather more, my research followed the study of Easley, Hvidkjaer, and O¡¦Hara (2002), who used the Fama-French asset pricing model(1992) discussing the relationship among stock return, portfolioed market risk, size and BE/ME ratio. The result in my study is that the stock return in TSEC is affected by portfolioed market risk and size, but PI and BE/ME ratio have no effect to stock return. The result is different from the study of Easley, Hvidkjaer, and O¡¦Hara (2002). The reason could be that most investors in TSEC are individuals who lack the awareness about information asymmetry.

Notre thèse explore les facteurs de risque et les modèles des facteurs sur le marché boursier chinois A-share. Notre étude est basée sur le contexte du modèle facteur de Fama-French (FF). Tout d'abord, au chapitre 1, nous réexaminons l'applicabilité du Modèle Fama-French à Trois Facteurs (FF3F) et du dernier Modèle Fama-French à Cinq Facteurs (FF5F), compte tenu de plusieurs caractéristiques spéciales du marché boursier chinois. Les résultats empiriques montrent que le Modèle FF3F peut expliquer la majorité des variations de séries chronologiques des rentabilités des actions chinoises A-share. Au cours de la période d'échantillonnage, le marché bêta et le facteur SMB sont des déterminants importants pour expliquer la variation transversale des rentabilités des actions, cependant nous ne trouvons aucune prime de valeur. D’après la comparaison des performances des modèles FF3F et FF5F en présence de facteurs de rentabilité et d'investissement, le Modèle FF5F ne semble pas capturer plus de variations de rentabilités espérées que le modèle à trois facteurs, à l'exception des six portefeuilles pondérées en valeurs qui formés à partir de la taille et de la rentabilité opérationnelle.Dans le chapitre 2, nous examinons si les facteurs FF, SMB et HML, sont des proxys d'innovations de variables d'état sélectionnées (rendement de dividende agrégée, taux de T-bonds en un mois, l’écart de terme et l’écart de défaut) qui décrivent, sur la période recherche, les opportunités futures d'investissement sur le marché boursier chinois A-share. Les régressions chronologiques et les régressions des séries transversales sont réalisées sur cinq modèles comparatifs en utilisant l'approche à deux étapes Fama-MacBeth. Les facteurs FF ne perdent pas leur pouvoir explicatif, avec ou sans la présence des innovations des quatre variables d’états sélectionnées, à la fois dans les examens de séries chronologiques et les examens transversaux. Nous trouvons que l'information contenue dans l'innovation de rendements de dividende agrégés semble totalement capturée par la combinaison du marché bêta et du facteur de taille. Les facteurs FF ont pu jouer un rôle limité de capturer d'opportunités d'investissement alternatives représentées par les innovations des quatre variables d'état sélectionnées.Dans le chapitre 3, nous étudions si les facteurs FF sont des proxys de facteurs de risque de détresse et si différentes méthodes de construction des facteurs entraînent des résultats différents. Les résultats empiriques suggèrent qu'il n'y a pas de preuve significative que les facteurs FF représentent un risque de détresse sur le marché boursier chinois A-share. En comparant les résultats des régressions des séries chronologiques à partir de deux méthodes différentes, la performance du facteur de risque de détresse basé sur le DLI semble légèrement meilleure que celui basé sur le O-score. Cependant, le facteur de risque de détresse n'est pas un déterminant important des rentabilités transversales moyennes, et les facteurs FF ne peuvent pas représenter le facteur de risque de détresse dans la section transversale du marché boursier chinois A-share. / This dissertation is to explore the risk factors and factor models on Chinese A-share stock market based on the context of Fama-French (FF) factor model. First of all, chapter 1 re-examines the applicability of Fama-French Three-Factor (FF3F) Model and the latest Fama-French Five-Factor (FF5F) Model considering several special features of Chinese stock market. FF3F Model can explain a majority of time-series variation of the Chinese A-share stock returns. The market beta and SMB are important determinants in explaining the cross-sectional variation in the average stock returns over the sample period; however, we find no value premium. Comparing the performance of both FF3F Model and FF5F Model on Chinese A-share stock market, in the presence of profitability and investment factors, FF5F Model seems not capture more variations of expected stock returns than the three-factor model except the six value-weighted portfolios formed on size and operating profitability.Chapter 2 examines whether FF factors SMB and HML proxy for the innovations of selected state variables (aggregate dividend yield, one-month T-bill rate, term spread and default spread) that describe future investment opportunities on Chinese A-share stock market during the research period. Both time-series and cross-sectional regressions are performed on five comparative models using Fama-MacBeth two-stage approach. FF factors don’t lose their explanatory power with or without the presence of the innovations of selected four state variables in both the time-series and cross-sectional examinations. We find that the information contained in innovation of aggregate dividend yields seems totally captured by the combination of market beta and size factor. FF factors might have played a limited role in capturing alternative investment opportunities proxied by innovations of the selected four state variables.Chapter 3 investigates whether FF factors proxy for distress risk factor and whether different methods of constructing factors result in the different outcomes. The empirical results suggest that there is no significant evidence that FF factors are proxying for distress risk on Chinese A-share stock market. Comparing the time-series regression results by using two different methods, the distress risk factor constructed based on DLI seems to perform slightly better than that constructed based on O-score in capturing time-series average returns. However, the distress risk factor is not an important determinant of cross-sectional average returns, and FF factors cannot proxy as distress risk factor in the cross-section on Chinese A-share stock market.