THE SPIRIT OF CAPITALISM, NON-EXPECTEDUTILITY AND ASSET PRICING

This paper investigates testable restrictions on the time-series behavior of consumption and asset returns implied by a representative agent model with the spirit of capitalism in which intertemporal preference is represented by a utility function that generalizes conventional, time-additive, expected utility. In the recursive structure of preference, the author examines the implication for cosumptions, portfolio holdings, and stock-market prices when investors accumulate wealth not only for the sake of consumption but also for wealth-induced social status. When investors care about relative social status, the propensity to consume and risk-taking behavior will depend on social standards, and stock prices will be volatible. Hence, the spirit of capitalism seems to be a driving force behind stock-market volatility and economic growth. Because the elasticity df substitution and the coefficient of relative risk aversion are independent and the spirit of capitalism is introduced, the equity premium puzzle can be partially explained in the model.

A new test on the conditional capital asset pricing model

Testing the validity of the conditional capital asset pricing model （CAPM） is a puzzle in the finance literature. Lewellen and Nagel[14] find that the variation in betas and in the equity premium would have to be implausibly large to explain important asset-pricing anomalies. Unfortunately, they do not provide a rigorous test statistic. Based on a simulation study, the method proposed in Lewellen and Nagel[14] tends to reject the null too frequently. We develop a new test procedure and derive its limiting distribution under the null hypothesis. Also, we provide a Bootstrap approach to the testing procedure to gain a good finite sample performance. Both simulations and empirical studies show that our test is necessary for making correct inferences with the conditional CAPM.

An Intertemporal General Equilibrium Model of Asset Prices with Labor Input

This paper develops the CIR model. In this model, labor is introduced in the production function and leisure in the direct utility function. We examine how the trade-off between labor and leisure would affect asset prices and derive a familiar principal partial differential equation which asset prices must satisfy. The solution of this equation gives the equilibrium price of any asset in terms of the underlying real variables in economy.

The Q theory of investment, the capital asset pricing model,and asset valuation： a synthesis

The paper combines Tobin's Q theory of real investment with the capital asset pricing model to produce a new and relatively simple procedure for the valuation of real assets using the income approach. Applications of the new method are provided.

Research on the Factors of Asset Prices in the Inflation Mechanism

With the acceleration of economic globalization and financial liberalization,factors of asset prices such as stock,bond and real estate and so on become important economic variables that affect inflation. After a brief review of the latest literature,this paper analyzes the specific conduction mechanism from different aspects of consumption,investment,credit and exchange rate channels in which asset prices affect inflation. Then,this paper analyzes the monthly data from January,2002 to December,2013 with the PLS method(partial least squares regression method)and discusses whether a structural change has taken place in the inflation mechanism during this period. Finally,policy recommendations are provided.

Empirical Asset Pricing-- Saudi Stylized Facts and Evidence

This paper estimates proxy specifications of a five-factor asset pricing model to produce stylized facts of the Saudi capital market and test an arbitrage pricing theory （APT） model. The data set is the panel of 20 most actively traded firms, excluding firms with negative book value of equity. The contribution to the extant literature is three-fold： （l） organizing Saudi market data based on beta and firm-specific fundamentals, namely, growth, value, accounting earnings, and equity investments; （2） conducting a parsimony analysis within the theoretical framework of APT; and （3） quantifying the information risk facing the marginal investor by decomposing earnings into cash flows and accruals and investigating respective loadings in an unrestricted version of the parsimonious specification. Proxy asset pricing specifications, though intuitively appealing, are scant due to lack of theoretical frameworks and misguided significance tests of factor loadings. Throughout, this issue is addressed by keeping the empirical analysis under describing market facts and testing an APT model. The study concludes with a significant empirical explanation that specifies average returns in terms of the covariance risk and accounting accruals.

Some Financial Problems in the Light of EMM Results:Asset Pricing and Efficient Portfolio Allocation

Discussing results in asset pricing and efficient portfolio allocation,we show that mixed success and errors in these results often follow from a lack of information about the asset return distribution and wrong assumptions about its properties.Some mistakes in asset pricing come from the assumption of symmetry in return distributions.Some errors in efficient portfolio allocation follow from Markowitz’s approach when applying it to portfolio optimization of skewed asset returns.The Extended Merton model(EMM),generating skewed return distributions,demonstrates that(i)in skewed asset returns,the variance is not an adequate measure of risks and(ii)positive skewness in the asset returns comes together with a high default probability.Thus,the maximization of the mean portfolio returns and skewness with controlled variance used in mainstream papers can critically increase portfolio risks.We present the new settings of the optimal portfolio allocation problem leading to less risky efficient portfolios than the solutions suggested in all previous papers.

Noise, Asset Prices, and Bubbles

The paper asserts that the misperceptions of noise traders are a behavioral bias characterized by overreactions. By introducing the overreaction coefficient, we provide an explanation for the volatility of asset prices and bubbles in a simplified framework that is similar to the DSSW （1990a） model. When the underlying asset is involved with a fundamental shock, noise traders will generally overreact to it, which creates an ＂overreaction risk＂. This kind of risk will make the asset prices more volatile, and even make up asset bubbles. Therefore, asset bubbles can be regarded as a psychological phenomenon, and are actually the results of the psychological changing process of noise traders.

Research on Insurance Pricing

In this paper, by analysing relationship between insurance premium and insurance compensation, the derivative assets pricing theory and the partial differential equation are used to studythe pricing of insurance products and establish insurance price models. In addition, insurance priceformulas for several general insurance types are also presented. The insurance pricing method thatis given in the paper doesn't depend on mortality ratio and the probability distribution of losses.It is an obvious difference between the insurance pricing method in the paper and the traditionalinsurance pricing methods. Thereby, this paper serves to develop a insurance pricing method, andhas important practical or immediate significance. Finally, the application of the method is given.

Interest rate swap pricing with default risk under variance gamma process

Under the assumption that the dynamic assets price follows the variance gamma process, we establish a new bilateral pricing model of interest rate swap by integrating the reduced form model for swap pricing and the structural model for default risk measurement.Our pricing model preserves the simplicity of the reduced form model and also considers the dynamic evolution of the counterparty assets price by incorporating with the structural model for default risk measurement. We divide the swap pricing framework into two parts, simplifying the pricing model relatively. Simulation results show that, for a one year interest rate swap, a bond spread of one hundred basis points implies a swap credit spread about 0.1054 basis point.

Corporate pledgeable asset ownership and stock price crash risk

We investigate how a firm’s corporate pledgeable asset ownership(CPAO)affects the risk of future stock price crashes.Using pledgeable asset ownership and crash risk data for a large sample of U.S.firms,we provide novel empirical evidence that a firm’s risk of a future stock price crash decreases with an increase in its pledgeable assets.Our main findings are valid after conducting various robustness tests.Further channel tests reveal that firms with pledgeable assets increase their collateral value,thereby enhancing corporate transparency and limiting bad news hoarding,resulting in lower stock price crash risk.Overall,the results show that having more pledgeable assets enables easier access to external financing,making it less likely that managers will hoard bad news.

Australian Government Assets Privatization Brings Golden Opportunities for Chinese Enterprises

Australian business investment is expected to be weak throughout 2015.The Westpac/Melbourne Institute Leading Index predicts the Australian economy is still"sluggish"and will grow at 2.75 percent in 2015.The Index,which indicates the likely pace of economic activity over the next three to nine months,rose by 0.30percentage points in January.Being fiscally challenged,the current Australian Federal and State governments are fiscally

Pricing factors in capital market and investment strategy： Evidence from Chinese listed companies

This paper explores the performances of some frequently used asset pricing factors and their investment implications in Chinese stock market. It is noted that CAPM model can hardly be applied to Chinese market as portfolios based on 13 values cannot generate high return against high risk. However, two factors （Size and B/M） from Fama-French model （1992） deliver better performances. Such findings indicate that models based on theoretical analysis are somewhat away from practice, and those risk factors from empirical studies are more applicable though not based on theories. Therefore, further researches are desirable concerning asset pricing factors.

Will the Type of Transaction Influence the Pricing Basis of Mergers and Acquisitions （M＆A）？ Evidence From China＇s Listed Companies

One of the important functions of assets valuation is to provide a fair value as the basis of mergers and acquisitions （M＆A） pricing. By using the M＆A samples ofchina＇s listed companies, this paper argues that, as the pricing basis, the appraisal value is better than the book value. But the transaction types will influence the function of the appraisal value as the pricing basis. The importance of appraisal value in the pricing of M＆A is significantly different in different types of transactions.

International Financial Market＇s Integration and Modelling Returns of Risky Assets

The aim of this paper is to test the ability of conditional and unconditional capital asset pricing models （CAPMs） and to explain emerging markets returns in terms of their integration into the international market. The authors use data on five developed countries and five emerging countries as well as data on the Tunis Stock Exchange （TSE） after the reforms. The results show that the correlations between emerging markets returns and developed markets returns are very low and sometimes negative. Conditional arbitrage pricing theory （APT） as well as conditional CAPM has low predictive power for emerging markets than that for developed markets. Finally, following the financial reforms, Tunisian financial markets have became more and more integrated into the international market （excess returns and unconditional beta consistent with predictions）. However, conditional APT does not accurately explain Tunisian market returns. This study confirms the unavailability of an accurate modelling technique of the TSE structure.

Pricing European Options Based on a Logarithmic Truncated t-Distribution

The t-distribution has a “fat tail” feature, which is more suitable than the normal probability density function to describe the distribution characteristics of return on assets. The difficulty of using t-distribution to price European options is that a fat tail can lead to a deviation in one integral required for option pricing. We use a distribution called logarithmic truncated t-distribution to price European options. A risk neutral valuation method was used to obtain a European option pricing model with logarithmic truncated t-distribution.

Empirical Examination of Market Reaction to Transfer Pricing Taxation Announcement in Press： A Japanese Perspective

The Japanese Taxation Agency （JTA） introduced transfer pricing taxation （TPT） in order to suppress the outflow of profits and therefore taxes of Japanese companies, which are expanding overseas. There have been many press reports regarding the application of TPT, and so there is much public attention on this issue. TPT is applied to unnatural transfer prices （TP）. If TPT is applied to a multinational company （MNC）, the company will need to bear enormous documentation costs in its calculation of the ratable price. In addition, in the last few years, the target of TPT is shifting to the overseas transfer of intangible assets, such as trademarks, royalties, patents, and charges income. As a result, companies have become more careful about TPT and investors tend to pay attention to companies＇ TPT strategy. With regard to this point, this paper examines how the market evaluates news regarding TP by investigating the market reaction to an initial press report mentioning that a firm was involved in a TP manipulation and may be guilty of tax underpayment. We examine these events both because press reports are currently under intense scrutiny and because there has been very little research on firms that engage in tax sheltering （see, e.g., Graham ＆ Tucker, 2006; Hanlon ＆ Slemrod, 2009）. Some view the fact that not all firms engage in tax sheltering as surprising because of the widespread view that shelters, at least in the 1990s, in expectation, offered a positive net present value position. The potential negative public relations effect is often cited as one reason for this ＂under-sheltering＂ phenomenon （Bankman, 2004）. On the event study analysis, we find that the Japanese capital market has shown a statistically significant negative reaction to the press reports. This result is due to a strong distrust of corporate activity regarding TP strategies. Moreover, in order to clarify the reason why the market responds to reports of TPT being applied, we compute the cumulative abnormal returns （CARs） around the date of the press report and conduct two-stage least-squares estimation to examine where this result regarding the market reaction comes from. Our results indicate that the variables for intangible assets and effective tax rate and the variables which represent the extent of corporate governance （CG） are statistically significant with respect to these reactions.

Determinants of market price of stock： A study on bank leasing and insurance companies of Bangladesh

Financial firms make up a substantial fraction of the domestic equity market. A number of studies subsequently used different conceptual and methodological approaches to model equity return of financial services firms. Movement of the stock price as the consequence of the movement of the micro and macroeconomic factors is strongly supported by the literature review. Dhaka Stock Exchange in Bangladesh is inefficient in weak form. Multiple regression analysis is conducted to find out the relationship microeconomic factors with the stock price. In this study found a significant linear relationship among market return and some microeconomic factors such as net asset value per share, dividend percentage, earning per share of bank leasing and insurance companies. Also found non-linear relationship among the variables is insignificant at 95 percent level of significance.

Low Oil Prices Gas up Chinese Buyers

As the downward trend levels out,companies from China are finding big bargains around the globe.A new wave of Chinese outbound oil acquisitions is expected in the second half of 2015 as well-financed Chinese firms take advantage of struggling companies while oil prices remain low globally,industry insiders say.The huge drop in oil prices over the past year,from US$110 per barrel in early July of last year to below US$50 by the beginning of 2015, has fundamentally shocked the industry. But the prevailing forecast in the business is for price stabilization.

市场情绪与基金投资策略:迎合还是修正?

基金投资策略选择是学术界、监管者和市场参与者共同关注的焦点.本文根据行为资产定价理论将基金投资策略量化为组合收益的市场情绪敏感度,首次在微观层面对其按照市场状态分类界定为迎合情绪策略与修正情绪策略,通过理论模型和实证检验探究基金的投资策略选择对其流量、风险和经理努力程度产生的系统影响,从行为委托代理视角剖析基金业绩的影响机制.研究发现:基金采取迎合策略时,对投资者特别是个体投资者更有吸引力,但会对投资者利益造成隐性侵害,表现为基金未来的风险增大、收益降低,且基金经理在无需付出更多努力的情况下可获得更高报酬.进一步分析表明,基金经理为取悦投资者的消极放任行为是其业绩表现不佳的重要原因;基金采取修正策略时,产生的系列影响则完全相反.本研究为中小投资者的投资实践、基金治理与监管,及解释基金市场异象提供了新的思路与启示.