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Conference Paper: Pricing deviation, misvaluation comovement, and macroeconomic conditions
Title | Pricing deviation, misvaluation comovement, and macroeconomic conditions |
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Authors | |
Keywords | Misvaluation Comovement Factor models Market efficiency Macroeconomic conditions |
Issue Date | 2012 |
Citation | The 25th Australasian Finance and Banking Conference, Sydney, Australia, 16-18 December 2012. In Social Science Research Network, 2012 How to Cite? |
Abstract | We measure individual stocks' misvaluation based on their firm-specific deviations from predicted intrinsic values. The misvaluation measure exhibits association with stocks' valuation uncertainty and arbitrage difficulty, and has significant power to forecast stock returns incremental to size, book-to-market ratio, momentum, and various return anomalies. Based on the misvaluation measure, we form a misvaluation factor and find that stocks' return covariances with this factor strongly predict the cross-section of returns even after the control of stocks' sensitivities to other return factors. We further show that the misvaluation factor and market-wide misvaluation waves predict future macroeconomic conditions, which provides further insights into the pricing of systematic misvaluation in the market. |
Persistent Identifier | http://hdl.handle.net/10722/182141 |
SSRN |
DC Field | Value | Language |
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dc.contributor.author | Chang, EC | en_US |
dc.contributor.author | Luo, Y | en_US |
dc.contributor.author | Ren, J | en_US |
dc.date.accessioned | 2013-04-17T07:24:21Z | - |
dc.date.available | 2013-04-17T07:24:21Z | - |
dc.date.issued | 2012 | en_US |
dc.identifier.citation | The 25th Australasian Finance and Banking Conference, Sydney, Australia, 16-18 December 2012. In Social Science Research Network, 2012 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/182141 | - |
dc.description.abstract | We measure individual stocks' misvaluation based on their firm-specific deviations from predicted intrinsic values. The misvaluation measure exhibits association with stocks' valuation uncertainty and arbitrage difficulty, and has significant power to forecast stock returns incremental to size, book-to-market ratio, momentum, and various return anomalies. Based on the misvaluation measure, we form a misvaluation factor and find that stocks' return covariances with this factor strongly predict the cross-section of returns even after the control of stocks' sensitivities to other return factors. We further show that the misvaluation factor and market-wide misvaluation waves predict future macroeconomic conditions, which provides further insights into the pricing of systematic misvaluation in the market. | - |
dc.language | eng | en_US |
dc.relation.ispartof | Social Science Research Network | en_US |
dc.subject | Misvaluation | - |
dc.subject | Comovement | - |
dc.subject | Factor models | - |
dc.subject | Market efficiency | - |
dc.subject | Macroeconomic conditions | - |
dc.title | Pricing deviation, misvaluation comovement, and macroeconomic conditions | en_US |
dc.type | Conference_Paper | en_US |
dc.identifier.email | Chang, EC: ecchang@business.hku.hk | en_US |
dc.identifier.email | Luo, Y: yanluo@hku.hk | en_US |
dc.identifier.email | Ren, J: renjinjuan@hotmail.com | - |
dc.identifier.authority | Chang, EC=rp01050 | en_US |
dc.description.nature | link_to_OA_fulltext | - |
dc.identifier.hkuros | 213825 | en_US |
dc.identifier.ssrn | 2135439 | - |