Traditional portfolio theory suggests that, in equilibrium, only the market risk is priced in the cross-section of expected stock returns. However, if the market is not perfect and investors are constantly changing investing behaviors based on their perceptions about future market outlook, then non-traditional risk factors could potentially provide significant power of describing the expected stock returns. This dissertation has two essays on the pricing of volatility, in which the market is not assumed to be frictionless or perfect. Essay 1 focuses on the pricing of individual volatility in penny stocks. Empirical results show that individual volatility plays an important role in describing the average cross-sectional returns of penny stocks. Resorting to the rolling portfolio approach, evidences indicate that portfolios consisting of penny stocks with high individual volatilities, on average, earned much higher returns than portfolios consisting of penny stocks with low individual volatilities. This effect is statistically significant when multiple factors are controlled simultaneously. Essay 2 focuses on the pricing of the market volatility among individual stocks. Following the rolling portfolio method, Essay 2 constructs portfolios that consist of individual stocks with various market volatility exposures. Traditional risk factors such as market beta, size, book-to-market, and momentum are controlled respectively to obtain more detailed analyses. Empirical results yield a negative pricing of the market volatility and it is more prominent in stocks that have high market beta, small size, and high book-to-market.
| Identifer | oai:union.ndltd.org:unt.edu/info:ark/67531/metadc1707393 |
| Date | 08 1900 |
| Creators | Yu, Huaibing |
| Contributors | Liu, Yi, Pavur, Robert, Liu, Yingchun, Feng, Guohua |
| Publisher | University of North Texas |
| Source Sets | University of North Texas |
| Language | English |
| Detected Language | English |
| Type | Thesis or Dissertation |
| Format | vi, 63 pages, Text |
| Rights | Public, Yu, Huaibing, Copyright, Copyright is held by the author, unless otherwise noted. All rights Reserved. |
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