In this study,we show that changes in profitability predict a firm's stock returns and future profitability.We construct three horizon-based profitability changes,including short-,medium-,and long-term changes.We ...In this study,we show that changes in profitability predict a firm's stock returns and future profitability.We construct three horizon-based profitability changes,including short-,medium-,and long-term changes.We find that the predictive information for short-term changes in profitability is not subsumed by the profitability level in the Chinese stock market.We also find that short-term profitability changes generate an asymmetrical premium across different market states.Furthermore,we find that the beta anomaly is embedded in the premium generated by a short-term change in profitability.In addition,we explore the underlying mechanisms of the profitability premium and propose a heterogeneous investor belief channel to explain the profitability premium.We find that riskbased q-theory also helps explain the profitability premium.Therefore,the profitability premium comes from a mixed source and cannot be entirely explained by a single theory.展开更多
This paper analyzes the influence of downside risk on defaultable bond returns.By introducing a defaultable bond-trading model,we show that the decline in market risk tolerance and information accuracy leads to tradin...This paper analyzes the influence of downside risk on defaultable bond returns.By introducing a defaultable bond-trading model,we show that the decline in market risk tolerance and information accuracy leads to trading loss under downside conditions.Our empirical analysis indicates that downside risk can explain a large proportion of the variation in yield spreads and contains almost all valid information on liquidity risk.As the credit level decreases,the explanatory power of downside risk increases significantly.We also investigate the predictive power of downside risk in cross-sectional defaultable bond excess returns using a portfolio-level analysis and Fama-Mac Beth regressions.We find that downside risk is a strong and robust predictor for future bond returns.In addition,due to the higher proportion of abnormal transactions in the Chinese bond market,downside risk proxy semi-variance can better explain yield spreads and predict portfolio excess returns than the proxy value at risk.展开更多
基金funded by the National Natural Science Foundation of China.(grant numbers:72171167,71532009,71471129,71501140).
文摘In this study,we show that changes in profitability predict a firm's stock returns and future profitability.We construct three horizon-based profitability changes,including short-,medium-,and long-term changes.We find that the predictive information for short-term changes in profitability is not subsumed by the profitability level in the Chinese stock market.We also find that short-term profitability changes generate an asymmetrical premium across different market states.Furthermore,we find that the beta anomaly is embedded in the premium generated by a short-term change in profitability.In addition,we explore the underlying mechanisms of the profitability premium and propose a heterogeneous investor belief channel to explain the profitability premium.We find that riskbased q-theory also helps explain the profitability premium.Therefore,the profitability premium comes from a mixed source and cannot be entirely explained by a single theory.
基金supported by the National Natural Science Foundation of China under Grant No.71471129,71501140
文摘This paper analyzes the influence of downside risk on defaultable bond returns.By introducing a defaultable bond-trading model,we show that the decline in market risk tolerance and information accuracy leads to trading loss under downside conditions.Our empirical analysis indicates that downside risk can explain a large proportion of the variation in yield spreads and contains almost all valid information on liquidity risk.As the credit level decreases,the explanatory power of downside risk increases significantly.We also investigate the predictive power of downside risk in cross-sectional defaultable bond excess returns using a portfolio-level analysis and Fama-Mac Beth regressions.We find that downside risk is a strong and robust predictor for future bond returns.In addition,due to the higher proportion of abnormal transactions in the Chinese bond market,downside risk proxy semi-variance can better explain yield spreads and predict portfolio excess returns than the proxy value at risk.
