This dissertation consists of three stand-alone essays on fundamental uncertainty, stock return volatility and earnings management. The first study investigates the role of information about firms?? fundamentals contained in analysts?? forecasts (which I label ??non-accounting information??) in understanding stock return volatility. When combined with Ohlson??s (1995) linear information dynamics, the accounting version of the Campbell-Shiller model (Campbell and Shiller 1988a, 1988b; Vuolteenaho 2002) implies that if current non-accounting information is more uncertain, then future stock returns are expected to be more volatile. The empirical evidence supports the theoretical predictions, and the results are valid for measures of both systematic and idiosyncratic volatility. Additional analysis yields some evidence that both favourable and unfavourable news from non-accounting information increases future stock return volatility. Overall, the results highlight the value relevance of information in analysts?? forecasts beyond what is contained in the current financial statements. The second essay extends the theoretical framework of Callen and Segal (2004) and Vuolteenaho (2002) to investigate the association between the uncertainty of accrual information and stock return volatility. The empirical evidence supports the theoretical prediction that the extent of uncertainty in accounting accruals is increasing with the volatility of future stock returns, and the results are valid for measures of both systematic and idiosyncratic volatility. However, when accrual variability is decomposed into fundamental and unexpected portions, I find that the positive relationship between accrual variability and future stock return volatility is dominated by the fundamental component of accrual variability. The findings therefore suggest that the market places little weight on information conveyed by that component of accounting accruals that is most likely to reflect accounting choices, implementation decisions and managerial opportunism. The final essay argues that the presumed articulation among accruals, cash flows and revenues does not capture decisions on expected accruals when large external financing activities are present. The analysis provides evidence that managers?? ??normal?? operating decisions associated with net external financing activities are likely to lead to measurement errors in unexpected accruals that are part of expected accruals, and erroneous conclusions that significant earnings management exists when in fact there is none. This is especially pertinent in cases where the partitioning variable used to identify instances of earnings management is supposed to be uncorrelated with external financing, when in fact it is correlated. The results underscore the importance of additional specification tests being conducted to control for estimation biases in unexpected accruals associated with external financing. I suggest the use of matched-firm approach using industry and external financing matches in order that reliable and warranted inferences are made.

The financial crisis has made the stock markets a very turbulent place. Investors have therefore begun searching for stable and profitable investments. Nordic real estate has for decades steadily increased in value and the stocks of real estate companies are said to be less risky than the market. This has led to a view of them being a safe haven for risk adverse investors. Very few empirical studies have been done on how these supposedly safe stocks actually behave in the Nordic countries. The purpose of this study is hence to investigate how these real estate companies stocks perform. The method employed is deductive and quantitative.One part of the research is to test whether or not the stocks are more profitable than the overall market. Additionally, motivated by previous research on market efficiency, this paper looks into if any predictable patterns for the real estate stocks returns can be found. In other words, if historical returns can be used to predict future returns. Thirdly this research paper looks into how risky the real estate stocks are compared to the market. For the last part of research, an examination on whether the usage of CAPM as a return calculator is appropriate for real estate stocks in the Nordic countries. The statistical tool SPSS and Microsoft Excel has been used to examine the relationships between the variables. The paper has used time series regression to find beta values and alpha values for risk assessments and tests of CAPM, and autocorrelation tests to determine market efficiency, or more precisely random walk.The research is are done on all real estate stocks on the Swedish, Finnish, Danish and Norwegian markets, a total of 31, over a time period of 10 years, between 2003 and 2013 on daily, weekly and monthly data. The result of the first part was that the real estate stock returns in general were not more profitable than the overall market. This research also found significant predictability of future returns through historical data on a daily basis, and some signs on a weekly basis while no predictability on a monthly basis. The result of the third part of the research is that the risk levels for the real estate stocks are different and in general much lower than the market risk. Lastly the test of CAPM shows no significant difference between the expected returns and the actual observed returns.

The stock market returns are the readily available tool for the investor to make investment decision and stock market return are affected by many accounting variables. Dividend policy measures and stock return relationship has been examined from decades but result is still a dilemma. This study is a step forward to solve this dilemma by considering Karachi stock exchange, Pakistan and Nordic stock markets and conducting a comparative study to also provide a knowledge base to readers. Dividend yield ratio, dividend payout ratio and other accounting variables are examined to find their effect on stock return. Pooled least square regression has been used on the data ranging from 2005-2008 and findings are different in different markets. Dividend policy measures (dividend yield ratio and dividend payout ratio) have significant effect on the stock return and in most countries there is significant negative relationship.

While improving the seasoned equity offerings, companies often manipulate the earnings or window the financial statements to get approval and increase IPO prices, and thus acquiring the funds easier. The main focus for this study is to exam whether the firms listed in Taiwan Stock Exchange manipulate earnings through discretionary accruals before the seasoned equity offerings, and the relationship between pre-issue discretionary accruals and the post-issue earnings, operating performance and long-term stock returns. The sample observed consists of 226 firms listed in Taiwan Stock Exchange conducting seasoned equity offering from 1991 to 1998 and the Modified Jones Model was used to estimate the discretionary accruals basing on the financial statements of the year. The discretionary accruals are the main research variables. The empirical results show that: 1. Firms listed in Taiwan Stock Exchange intend to manipulate the discretionary current accruals before conducting the seasoned equity offerings in order to improve earnings, and the larger pre-issue discretionary accruals, the larger the decline of post-issue earnings. 2. The post-issue total asset returns are clearly negatively correlated to the discretionary current accruals in the year before the seasoned equity offerings, indicating that the adjustment of discretionary accruals will influence the post-issue operating performance. 3. Excluding the possible influences from the industry, the discretionary current accruals present significantly negative effect on the post-issue operating performance. The level of earnings management becomes larger, the post-issue long-term stock return will decline greater.

This dissertation consists of two essays in asset allocation. In the first essay, I measure the value of active money management. I explore this issue by comprehensively examining the parametric rule proposed by Brandt, Santa-Clara and Valkanov (2009) (the BSV rule) out-of-sample for portfolio selection among 3516 stocks in CRSP and comparing this rule to the mean-variance (MV) rule and the naïve 1/N rule recently advocated by DeMiguel, Garlappi and Uppal (2009). The BSV rule outperforms both the MV and 1/N rules and the outperformance is robust to investment horizons and stock market states. The BSV rule is effective for investors with different preferences or investment opportunities. The effectiveness of the BSV rule is robust to data screening criteria, estimation periods, portfolio performance evaluation models, the business cycle, and stock market states. In the second essay, I explore the question of whether macroeconomic state variables are able to predict cross-sectional stock returns from the perspective of asset allocation. I find that conditioning on macroeconomic state variables leads to optimal portfolios with a Carhart alpha that is 125 basis points per month higher than unconditional optimal portfolios out-of-sample. Unfortunately, conditioning on macroeconomic states is subject to an "overfitting" problem and can lead investors to experience unexpected huge losses. My results suggest that macroeconomic state variables mare able to predict cross-sectional stock returns but risk-averse investors need to combine other funds (e.g. market portfolio) to take advantage of this predictability.

This dissertation consists of three stand-alone essays on fundamental uncertainty, stock return volatility and earnings management. The first study investigates the role of information about firms?? fundamentals contained in analysts?? forecasts (which I label ??non-accounting information??) in understanding stock return volatility. When combined with Ohlson??s (1995) linear information dynamics, the accounting version of the Campbell-Shiller model (Campbell and Shiller 1988a, 1988b; Vuolteenaho 2002) implies that if current non-accounting information is more uncertain, then future stock returns are expected to be more volatile. The empirical evidence supports the theoretical predictions, and the results are valid for measures of both systematic and idiosyncratic volatility. Additional analysis yields some evidence that both favourable and unfavourable news from non-accounting information increases future stock return volatility. Overall, the results highlight the value relevance of information in analysts?? forecasts beyond what is contained in the current financial statements. The second essay extends the theoretical framework of Callen and Segal (2004) and Vuolteenaho (2002) to investigate the association between the uncertainty of accrual information and stock return volatility. The empirical evidence supports the theoretical prediction that the extent of uncertainty in accounting accruals is increasing with the volatility of future stock returns, and the results are valid for measures of both systematic and idiosyncratic volatility. However, when accrual variability is decomposed into fundamental and unexpected portions, I find that the positive relationship between accrual variability and future stock return volatility is dominated by the fundamental component of accrual variability. The findings therefore suggest that the market places little weight on information conveyed by that component of accounting accruals that is most likely to reflect accounting choices, implementation decisions and managerial opportunism. The final essay argues that the presumed articulation among accruals, cash flows and revenues does not capture decisions on expected accruals when large external financing activities are present. The analysis provides evidence that managers?? ??normal?? operating decisions associated with net external financing activities are likely to lead to measurement errors in unexpected accruals that are part of expected accruals, and erroneous conclusions that significant earnings management exists when in fact there is none. This is especially pertinent in cases where the partitioning variable used to identify instances of earnings management is supposed to be uncorrelated with external financing, when in fact it is correlated. The results underscore the importance of additional specification tests being conducted to control for estimation biases in unexpected accruals associated with external financing. I suggest the use of matched-firm approach using industry and external financing matches in order that reliable and warranted inferences are made.

In this thesis, I examine the following three temporal influences on the cross-section of stock returns: disclosure and analyst regulations, the subprime credit crisis, and time-varying investor sentiment. The thesis consists of three essays. The first essay deals with the influence of regulation. Between 2000 and 2003 a series of disclosure and analyst regulations curbing abusive financial reporting and analyst behavior were enacted to strengthen the information environment of U.S. capital markets. I investigate whether these regulations benefited investors by increasing stock market efficiency. After the regulations, I find a significant reduction in short-term stock price continuation following analyst forecast revisions and past stock returns. The effect was more pronounced among higher information uncertainty firms, where I expect security valuation to be most sensitive to the regulations. Further analysis shows that analyst forecast accuracy improved in these firms, consistent with reduced mispricing being due to an improved corporate information environment following the regulations. My findings are robust to controlling for time trends, trading activity, the recent financial crisis, and changes in firms’ analyst coverage status and delistings. In the second essay, I examine whether the value premium survived the recent subprime credit crisis. I find that value stocks underperformed growth stocks during the crisis, resulting in a value discount, while the value premium was significantly positive before the crisis. This is consistent with value stocks being riskier than growth stocks because they are more vulnerable during bad times. The value premium reversal during the crisis worked primarily through financially constrained firms, suggesting that the effect was due to the adverse influence of the crisis rather than confounding effects. The results are robust to controlling for common risk factors and alternative financial constraint proxies. The third essay is related to time-varying investor sentiment. Recent literature in financial economics has examined whether investor sentiment affects asset pricing. An open question is whether an investor sentiment effect reflects mispricing or risk compensation. Currently, the literature supports the former view by documenting that investor sentiment predicts realized stock returns beyond the explanatory power of state-of-the-art factor models. But, despite its popularity, estimating expected returns from realized returns has limitations. I re-examine the evidence on investor sentiment using accounting-based implied costs of capital (ICCs). I find that ICCs cannot explain the sentiment effect on stock returns. If ICCs are reliable expected return proxies, this suggests that the investor sentiment effect does not exist ex ante and confirms previous evidence that mispricing is the driving force behind the investor sentiment effect on stock returns.

The purpose of this dissertation is to examine the direct impact of cryptocurrencies, primarily Bitcoin, on stock returns, as well as to analyze the characteristics of some of the companies which Bitcoin has a large impact on stock returns and the reasons why these phenomena occur. The study examines the returns of three variables, NSDQ100 Index, Bitcoin price, and stock prices of 101 enterprises within NSDQ100 by analyzing the monthly ended figures over the past five years. As the nature of Bitcoin that cannot be directly linked to stock returns, the direct impact of Bitcoin on stock return was discussed and analyzed through two regression analyses of NSDQ100 returns and stock returns, as well as NSDQ100 returns, bitcoin returns and stock returns. This study concludes that the direct impact of Bitcoin on the stock returns of companies in the Technology and Consumer Discretionary sectors, which involve consumer goods, is significant; whereas its impact on the stock returns of companies in the Health Care sector and Consumer Discretionary sector that do not directly provide products is small. / Business Administration/Finance

This study investigates the peer effect in the asset pricing models in the international stock market. The peer effect theory proposes a dependence between individual decisions due to interactions that create a social network structure. The idea is that we need to understand the correlation between outcomes of individuals that interact in an environment and which could lead to a homogenous pattern of movement especially on asset pricing models. We use a sample of almost 7,000 companies listed on fourteen countries from 2006 to 2016 and arrange them in four peer groups. Since the peer effect has a reflection problem, we divide our empirical models in two aspects. First, we analyze the relationship between stock return from the firm, its financial aspects and the financial aspects for the peer group using a fixed effect regressor. Then, we try to understand the relationship between stock return from a firm, the stock return from the peer firms, the financial aspects from the firm and the financial aspects for the peer group by estimating a 2SLS model with an instrumental variable. Our findings show the existence of peer effects on stock return for all the peer groups. Also, the effects are always positive regardless if we select emerging or developed markets. Moreover, there is exogenous peer effect from the characteristics of the peer firms in the stock return that depends on the indicator and the peer group. Market-to-book ratio of the peers presents a positive relationship with the stock return. As a robustness test, we re-estimate the models for two subsamples and find that the results are consistent to the previous ones. / Este estudo investiga o efeito dos pares nos modelos de precificação de ativos no mercado acionário internacional. A teoria do efeito de pares propõe uma dependência entre decisões individuais devido a interações que criam uma estrutura de rede social. A ideia é entender a correlação entre os resultados de indivíduos que interagem em um ambiente e que podem levar a um padrão de movimento homogêneo, especialmente em modelos de precificação de ativos. Utiliza-se uma amostra de quase 7.000 empresas de capital aberto em catorze países de 2006 a 2016 considerando quatro grupos de referência. Como o efeito par tem o conhecido problema de reflexão, divide-se os modelos empíricos em dois aspectos. Primeiro, analisa-se a relação entre o retorno das ações, os aspectos financeiros da firma e os aspectos financeiros do grupo de referência utilizando um modelo de efeito fixo em painel. Em seguida, busca-se entender a relação entre o retorno das ações de uma empresa, o retorno das ações das empresas pares, os aspectos financeiros de ambas, estimando um modelo 2SLS com uma variável instrumental. Os resultados mostram a existência de comovimento no retorno das ações para todos os grupos de referência. Os efeitos do retorno das ações dos pares são positivos e mais intensos para a indústria e país independentemente se se escolhe mercados emergentes ou desenvolvidos. Além disso, existe um efeito de pares exógeno a partir das características das empresas pares, principalmente para razão market-to-book, que depende do indicador financeiro e do grupo de referência. Como teste de robustez, reestimou-se os modelos para duas subamostras que mostraram resultados consistentes com os anteriores.

The Value investment and Growth investment are investment strategies of choosing stocks. These two methods are adopted by international financial investment institutions and mutual fund managers. The study is aim to learn when we classify value stock and growth stock by market-to-book ratio and price-earning ratio, if the investment return would be higher than TSEC weighted index. In addition, we seek for a better investment strategy to improve investment performance further. The study also looks into market abnormal effects , such as January effect, size effect¡Ketc, and also discuss about the variables of stocks holding period and debt ratio. The monthly and yearly investment return rates are used to calculate 1, 2, 3, 4, and 5 year accumulated abnormal stock return ratio and evaluate if these variables affect investment performance of value stock and growth stock. The results are as following: 1. When classification of market-to-book ratio are adopted, the investment return of value stock is higher than growth stock. 2. When classification of market-to-book ratio are adopted, the investment return of low debt ratio stock is higher than high debt ratio stock. However, when classification of price-earning ratio are adopted, it is not obvious. 3. When bull market is formed in Taiwan stock market whose index is still low, invest in value stock could get a good long term investment performance. 4. Regarding the evaluation of risk, the vibration of growth stock is more than value stock. The vibration of TSEC weighted index is the least. 5. The January effect exists in Taiwan stock market. However, the size effect is not obvious. 6. TSEC weighted index and the Dow Jones Industrial index affect the investment return of value stock and growth stock; the TSEC weighted index, value stock and growth stock are positively correlated. The Dow Jones Industrial Index, value stock and growth stock are negatively correlated.