This work utilizes zero-beta CAPM to derive an alternative form dubbed the ZCAPM. The ZCAPM posits that asset prices are a function of market risk composed of two components: average market returns and cross-sectional market volatility. Market risk associated with average market returns in the CAPM market model is known as beta risk. We refer to market risk related to cross-sectional market volatility as zeta risk. Using U.S. stock returns from January 1965 to December 2010, out-of-sample cross-sectional asset pricing tests show that the ZCAPM better predicts stock returns than popular three- and four-factor models. These and other empirical tests lead us to conclude that the ZCAPM holds promise as a robust asset pricing model.

This thesis focuses on the analysis of Catastrophe bond mutual funds [CBMFs] and is organized into four chapters. The first chapter, "An identification-robust analysis of Catastrophe bond mutual funds: zero-beta neutrality under tradability", offers identification-robust evidence on whether CBMFs are zero-beta based on the analysis with only tradable risk factors. Statistical significance of factor risk premiums and cross-sectional loadings is examined in a multivariate, identification-robust setting to inform on the zero-beta performance of CBMFs. The latter is assessed against the Capital Asset Pricing Model [CAPM] without the risk-less asset proposed by Black (1972) [BCAPM], Quadratic CAPM, Cummins-Weiss, Fama-French-Carhart benchmarks and models with Fontaine and Garcia (2012) and Pástor and Stambaugh (2003) liquidity factors. Multiple markets are considered individually and jointly. Beta pricing inference proceeds using the method of Beaulieu, Dufour and Khalaf (2013) robust to weak identification. Instead of non-tradable factors, their mimicking portfolio returns are used in the analysis to facilitate tradable-only factor setting. Results indicate that coskewness, funding liquidity and fixed-income factors are often priced or incur significant factor betas. There is also evidence of risk premiums and joint beta significance for stock, corporate bond and commercial mortgage-backed securities benchmarks. Empirical findings overall suggests that CBMFs underperformed as zero-beta assets. The second chapter, "Zero-beta inference on Catastrophe bond mutual funds: identification- robust evidence with non-tradable factors", examines formally the zero-beta neutrality of CBMFs allowing for some risk factors to be non-tradable. Zero-beta analysis focuses on cross-sectional betas with their joint significance tested for each factor. This is augmented with inference on risk prices and the zero-beta rate to assess whether factor risks are priced. CBMFs are modeled in the QCAPM setting with either stock, corporate bond, government bond or commercial mortgage-backed security [CMBS] market return and its square as respectively tradable and non-tradable factors. The zero-beta performance of CBMFs is also assessed against an extended BCAPM benchmark with either Fontaine and Garcia (2012) or Pástor and Stambaugh (2003) non-tradable liquidity factor considered in addition to the tradable market return. Inference on risk prices and the zero-beta rate builds on the method of Beaulieu, Dufour and Khalaf (2018) which remains exact and simultaneous for any sample size even if the parameter recovery is impaired. Empirically, although identification strength diminishes in the setting with non-tradable factors, relaxing tradability improves model fit across all benchmarks. In particular, QCAPM (reix gardless of the market) is no longer rejected for any period and so is the model with the funding liquidity factor. Goodness-of-fit also improves for the model with the marketwide liquidity factor. In periods for which models were rejected under factor tradability, allowing for some factors to be non-tradable also yields set estimates for the zero-beta rate and risk prices that are informative for beta pricing. In particular, this reveals evidence of priced coskewness risk across all markets over the long-run and for stock, corporate bond and CMBS benchmarks after the 2007-09 US recession. In the same periods, funding liquidity risk is also priced and so is the marketwide liquidity risk over the full sample. Given significant betas on the market return, the latter prevails as a relevant factor even in a setting with other factors being non-tradable. Overall, there is evidence suggesting that CBMFs deviated from performing as zero-beta investments with coskewness and liquidity as contributing factors. These results reinforce findings in the Chapter 1. The third chapter, "An alpha and risk analysis of Catastrophe bond mutual funds: exact, simultaneous inference", examines CBMFs in terms of their ability to produce a positive alpha and the extent of their sensitivity to the developments in financial markets. Inference on alphas and the riskiness of CBMFs relies on exact, simultaneous confidence sets assembled respectively for cross-sectional intercepts and factor loadings in the multivariate linear regression [MLR] model. Set construction proceeds using the analytical inversion procedure of Beaulieu, Dufour and Khalaf (2018) in a Least-Squares case and its extension to a Student-t setting. Proposed in this chapter, the extension involves replacing the Fisher-based cut-off point in the analytical solution of Beaulieu, Dufour and Khalaf (2018) with its simulation-based counterpart obtained under Student-t errors. The empirical analysis of CBMFs reveals evidence of a positive alpha following the 2011 Tohoku earthquake in Japan and indicate that CBMFs are likely to have at most moderate sensitivity to fluctuations in financial markets. These results are robust against CAPM, QCAPM and Fama-French benchmarks and observed in both Gaussian and Student-t settings. The fourth chapter, "Endogeneity in a zero-beta analysis: joint, finite sample inference on Catastrophe bond mutual funds", revisits the zero-beta assessment of CBMFs taking into account factor endogeneity. In particular, this chapter extends the univariate Durbin-Wu-Hausman [DWH] test (Durbin, 1954; Wu, 1973; Hausman, 1978) of exogeneity to a multivariate setting. Unlike the univariate DWH test, the proposed multivariate extension allows to assess factor exogeneity jointly across equations. This chapter also proposes an extended version of the multivariate Wilks-based instrumental variables [IV] test of Dufour, Khalaf and Kichian (2013) to a setting with regressors, and consequently their instruments, that remain the same across equations. Both extended tests allow for possibly non-Gaussian errors and maintain size correctness for a sample with any number of observations even in the setting with weak instruments. Applying the extended methods to the analysis CBMFs provides evidence against joint factor exogeneity in some cases across CAPM and QCAPM in both Gaussian and Student-t settings. In some periods when the joint factor exogeneity is rejected, results for the zero-beta analysis differ depending on whether the IV-based or non-IV test was applied. Unlike in the case without instrumenting, extended Wilks-based IV test of joint beta significance is significant at the 5% level before the 2007-09 US recession for both CAPM and QCAPM regardless of the distributional setting (Gaussian or Student-t). The same result also obtains for QCAPM during the economic downturn. Over the long-run, there is evidence of jointly significant factor loadings obtained with and without instrumenting. Overall, empirical results suggest that performance of CBMFs differs from that of zero-beta assets.

Submitted by Roberta Lorenzon (roberta.lorenzon@fgv.br) on 2011-05-27T13:47:34Z No. of bitstreams: 1 63080100004.pdf: 368251 bytes, checksum: ce0bde671225071c3084007fcda47ca1 (MD5) / Approved for entry into archive by Suzinei Teles Garcia Garcia(suzinei.garcia@fgv.br) on 2011-05-27T14:10:52Z (GMT) No. of bitstreams: 1 63080100004.pdf: 368251 bytes, checksum: ce0bde671225071c3084007fcda47ca1 (MD5) / Approved for entry into archive by Suzinei Teles Garcia Garcia(suzinei.garcia@fgv.br) on 2011-05-27T14:11:59Z (GMT) No. of bitstreams: 1 63080100004.pdf: 368251 bytes, checksum: ce0bde671225071c3084007fcda47ca1 (MD5) / Made available in DSpace on 2011-05-27T15:16:43Z (GMT). No. of bitstreams: 1 63080100004.pdf: 368251 bytes, checksum: ce0bde671225071c3084007fcda47ca1 (MD5) Previous issue date: 2010-05-20 / Este trabalho analisa as propriedades de alguns índices em busca da melhor aproximação (proxy) para a carteira de mercado brasileira. Além dos usuais Ibovespa, IBrX, FGV-100, são considerados dois índices construídos segundo as diretrizes da Moderna Teoria de Carteiras, a saber, uma carteira ponderada pelo valor de mercado (PV) e uma carteira igualmente ponderada (PI). Em um primeiro teste é analisada a eficiência em média e variância e em um segundo avalia-se o potencial dos índices como fatores de risco sistemático. O estudo cobre o período de 1996 a 2009 e todas as ações negociadas na BOVESPA. Os resultados evidenciam a semelhança nas qualidades dos índices, não sendo possível destacar uma melhor aproximação. Ibovespa, IBrX e FGV-100 são aproximações razoáveis e podem ser utilizadas.

Made available in DSpace on 2016-04-25T16:44:54Z (GMT). No. of bitstreams: 1 Stefan C Lee.pdf: 425129 bytes, checksum: b42eba077dbf34d3a8fc08b95deafb31 (MD5) Previous issue date: 2007-05-09 / This dissertation analyzes the relationship between the return on equity and the cost of equity, as suggested by the CAPM: Capital Asset Pricing Model, for non financial Brazilian companies. Among the various kinds of returns on equity, the net profit divided by shareholder s accounting equity was adopted as the principal return, having advantages including widespread utilization and simplicity. Sector samples, taken from the paper and pulp, steel, textile and petrochemical sectors, and a non sector sample, composed of 105 companies, were analyzed. The differences between ROE and cost of equity were calculated for the period between 1995 and 2005 and the parametrical t Student and non parametrical Wilcoxon statistic tests were carried out to compare means. The results reveal a pessimistic scenario for investments in Brazil and, from the five samples, only one from the steel sector sample reported a compatible ROE with the cost of equity. Most of non financial Brazilian companies do not have equal or higher returns than the cost of equity and, worse of all, these returns are many times lower than federal interest rates. Complementary analysis with the multi regression technique indicated a paradox due to the coexistence of a high cost of equity, shareholder s value destruction, and continuity, creation, and growth of investments. Future studies are proposed to understand and rationalize the results / O trabalho se propõe a analisar a relação entre o retorno sobre o patrimônio líquido e o custo do capital próprio, medido pelo Capital Asset Pricing Model, das empresas não financeiras brasileiras. Dentre os diversos retornos do capital próprio, o lucro líquido sobre o patrimônio líquido contábil foi o principal adotado, tendo como vantagens também a simplicidade e difusão. Foram extraídas amostras setoriais de papel e celulose, de metalurgia e siderurgia, têxtil e de petroquímica, e uma não setorial, que foi composta por 105 empresas. As diferenças entre os retornos sobre o patrimônio líquido e o custo do capital próprio foram coletadas para o período de 1995 a 2005 e foram realizados os testes paramétrico t Student e não paramétrico Wilcoxon de igualdade de médias. Os resultados obtidos apontam um cenário pessimista para investimentos no Brasil, uma vez que das cinco amostras, apenas a do setor de metalurgia e siderurgia teve retornos sobre o patrimônio líquido compatíveis com o custo do capital próprio. A maioria das empresas brasileiras não financeiras não consegue igualar ou superar o custo do capital próprio e, em vários casos, não conseguem sequer superar a taxa base. Análises complementares baseadas em regressões multivariadas indicaram um paradoxo entre as coexistências de um alto custo de capital próprio, destruição de valor aos acionistas, e a continuidade, a criação e a ampliação dos investimentos. Estudos futuros são propostos para a compreensão e racionalização dos resultados