Diss. Stockholm : Handelshögskolan, 2008.

Diss. Wirtschaftswiss. St. Gallen, 1988 ; Nr. 1088. / Bibliogr.: p. 309-332.

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Made available in DSpace on 2016-03-15T19:26:28Z (GMT). No. of bitstreams: 1 Jose Matias Filho.pdf: 472539 bytes, checksum: b16566d14af94e4d158e78a2ec6bb9b3 (MD5) Previous issue date: 2006-04-11 / Innumerous studies have being searching to measure the risk component involved in the expected return for capital investments, remarking decades of hard work of many relevant Financial Theory authors worldwide, while being a common activity between analysts of financial institutions and other parts of the market. The object of this work is to contribute to this search, through the evaluation of alternative methodologies to calculate the CAPM (Capital Asset Pricing Model) when submitted to the Brazilian Stock Market conditions, through the application of four methodologies to determine the Beta, three methodologies to calculate the CAPM and eight distinct macroeconomics scenarios. The purpose is to determine equal relations between a group of distinct expected returns obtained and the effective behavior of the asset returns studied in many periods of measurement. It was used the statistic method known as test for differences in two means to compare many series of expected returns obtained and their respective effective returns, getting results that suggests the use of some methodologies and scenarios as valid tools to predict future returns to some financial assets of our market. / Inúmeros estudos têm sido feitos procurando mensurar o componente de risco envolvido no retorno esperado em investimentos de capital, cuja busca já remonta várias décadas e tem tido o envolvimento dos principais autores mundiais em teoria financeira, além de ser atividade obrigatória nas mesas de operações das instituições financeiras e demais participantes do mercado. O objetivo deste trabalho é de contribuir com essa busca, através da avaliação de metodologias alternativas de cálculo do CAPM (Capital Asset Pricing Model) quando submetidas às condições do mercado de ações brasileiro, através da aplicação de quatro metodologias de determinação do índice beta e três metodologias de cálculo do CAPM diferentes, em 8 cenários macro-econômicos distintos. Busca-se dessa forma determinar relações de igualdade entre o conjunto dos diversos retornos esperados obtidos e o efetivo comportamento de retornos dos ativos estudados em períodos diversos de medição. Foi utilizado o método estatístico conhecido como Teste de Hipóteses de Diferença de Médias para comparar as diversas séries de retornos esperados obtidos com os respectivos retornos efetivos, obtendo resultados que sugerem a indicação de algumas metodologias e cenários como ferramentas válidas na predição de retornos futuros de alguns ativos financeiros de nosso mercado.

In the first chapter, I examine the effect of social learning on social norms of cooperation. To this end I develop an 'anti-social learning' game. This is a dynamic social dilemma in which all agents know how to cooperate but a proportion are informed and know of privately profitable but socially costly, or uncooperative, actions. In equilibrium agents are able to infer, or learn, the payoffs to the actions of prior agents. Agents can then learn through observation that some socially costly action is privately profitable. This implies that an informed agent behaving uncooperatively can induce others to behave uncooperatively when, in the absence of observational learning, they would have otherwise been cooperative. However, this influence also gives informed agents an incentive to cooperate - not cooperating may induce others to not cooperate. I use this model to give conditions under which social learning propagates cooperative behaviour and conditions under which social learning propagates uncooperative behaviour. In the second chapter, I present a co-authored model of a self-fulfilling price cycle in an asset market. In this model the dividend stream of the economy's asset stock is constant yet price oscillates deterministically even though the underlying environment is stationary. This creates a model in which there is rational excess volatility - 'excess' in the sense that it does not reflect changes in dividend streams and 'rational' in that all agents are acting on their best information. The mechanism that we uncover is driven by endogenous variation in the investment horizons of the different market participants, informed and uninformed. On even days, the price is high; on odd days it is low. On even days, informed traders are willing to jettison their good assets, knowing that they can buy them back the next day, when the price is low. The anticipated drop in price more than offsets any potential loss in dividend. Because of these asset sales, the informed build up their cash holdings. Understanding that the market is flooded with good assets, the uninformed traders are willing to pay a high price. But their investment horizon is longer than that of the informed traders: their intention is to hold the assets they purchase, not to resell. On odd days, the price is low because the uninformed recognise that the informed are using their cash holdings to cherry-pick good assets from the market. Now the uninformed, like the informed, are investing short-term. Rather than buy-and-hold as they do with assets purchased on even days, on odd days the uninformed are buying to sell. Notice that, at the root of the model, there lies a credit constraint. Although the informed are flush with cash on odd days, they are not deep pockets. On each cherry that they pick out of the market, they earn a high return: buying cheap, selling dear. However they don't have enough cash to strip the market of cherries and thereby bid the price up. The final chapter is on identifying the role of privilege in determining inter- generational mobility. The intergenerational elasticity of income is the standard measurement economists use for intergenerational mobility. It is not clear how we should interpret intergenerational elasticities. Particularly, high intergenerational elasticities could either reflect inequality of opportunity or the importance of genetically heritable characteristics in determining genes. Behavioural geneticists have long been using a twin based variance decomposition method, the ACE model, to estimate the genetic heritability of various characteristics. It is not clear, however, what this approach implies for intergenerational mobility of equality of opportunity. I develop a novel method that extends the methodology used in behavioural genetics to identifying how much of the intergenerational elasticity of income is determined by the presence (absence) of environmental privileges associated with being children of high (low) earners. Using this approach we can examine the counterfactuals of giving a poorer child the environment of a richer child; equalising the privileges associated with family income; and equalising the family environmental factors not associated with parental income. Furthermore, this method allows us to identify how good parental income is as a measure of family environment. The model I develop nests the behavioural genetics model allowing us to relax some of the identifying assumptions used in the standard ACE model. Finally, I apply this method to data on the income elasticities between American males of different types of relation: fraternal twins, identical twins and father-son relationships. The results of this application suggest that a 1 percent increase in the privilege associated with parental income increases child income by about 1 tenth of a percent. Equalising, to the mean, the environmental privileges across the population results in about a 30 percent drop in the intergenerational elasticity of income and a 5 percent drop in the variance of income across the population. These results must be treated tentatively as the twin data comes from a separate survey to the data on intergenerational elasticities.

In the first essay, I examine the impact of the introduction of exchange traded funds (ETFs) options on the information related trading of index options. Two option pairs, NASDAQ 100 index (NDX) and ETF (QQQ, currently QQQQ ) options, and Standard and Poor's 500 index (SPX) options and S & P Depository Receipts (SPY) options, are studied. I test the hypothesis, based on the theory of Chowdhry and Nanda (1991), and Admati and Pleiderer (1988), that the information component of spreads for index options should decline after ETF options were introduced. The method of George, Kaul and Nimalendran (1991) is used to estimate the adverse selection proportion of log quoted spread and revenue from quoted spread. Primary results show that the adverse selection component of index options declines after the introduction of ETF options, and that the adverse selection component of options on index ETFs is greater than that of options on index, suggesting more informed trading for ETF options. The second essay examines whether the liquidity premium decreases as the costs of transactions decline. Nine liquidity measures are estimated to form liquidity deciles portfolios. I use several benchmark asset pricing models in fixed and rolling 36-month samples to estimate time variation liquidity premia. Surprisingly, the results show that the liquidity premium does not monotonically decline over time, and it increases in the period from 2001 to 2006. This is inconsistent with the implication of liquidity-adjusted capital asset pricing models (L-CAPM). It is likely that the liquidity premium is generated by size and book-to-market factors, rather than the liquidity factor.

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Natural gas markets are incomplete due to physical limitations and low liquidity, but most valuation approaches for natural gas storage contracts assume a complete market. We propose an alternative approach based on indifference pricing which does not require this assumption but entails the solution of a high- dimensional stochastic-dynamic optimization problem under a risk measure. To solve this problem, we develop a method combining stochastic dual dynamic programming with a novel quantization method that approximates the continuous process of natural gas prices by a discrete scenario lattice. In a computational experiment, we demonstrate that our solution method can handle the high dimensionality of the optimization problem and that solutions are near-optimal. We then compare our approach with rolling intrinsic valuation, which is widely used in the industry, and show that the rolling intrinsic value is sub-optimal under market incompleteness, unless the decision-maker is perfectly risk-averse. We strengthen this result by conducting a backtest using historical data that compares both trading strategies. The results show that up to 40% more profit can be made by using our indifference pricing approach.

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