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ERIC Number: ED526683
Record Type: Non-Journal
Publication Date: 2009
Pages: 75
Abstractor: As Provided
Reference Count: N/A
ISBN: ISBN-978-1-1095-7775-4
Essays on Market Microstructure, Behavioral Finance, and Asset Management
Jochec, Marek
ProQuest LLC, Ph.D. Dissertation, University of Illinois at Urbana-Champaign
This is a study on various aspects of market microstructure, behavioral finance and asset management. In the first chapter we put the PIN variable (Probability of Information-based trading) to test. The PIN variable has been used extensively in the microstructure literature despite the fact that its construction is based on rather strong assumptions about the arrival of new information and the ways investors react to it. We find that for a large set of stocks and over multiple periods the PIN variable is either lower or insignificantly higher before earnings announcement dates than it is after earnings announcement dates. This implies that PIN does not accurately capture the probability of informed trading. In the second chapter we explore whether peoples' patriotic exuberance has any impact on stock prices and what this impact is. We find that stocks with "patriotic" names earn positive abnormal returns of about 6% per annum during the Second World War, the War in Korea and the War on Terror. These abnormal returns are not realized immediately upon the outbreak of each of the wars but are accumulated gradually during wartime. We hypothesize that victorious wars arouse investors' patriotic feelings and cause them to gradually and perhaps subconsciously gravitate toward stocks whose name has a patriotic flavor. Finally, in the last chapter we use daily observations from 448 actively managed funds and employ the empirical strategy of Bollen and Busse (2001) to assess the ability of fund managers to time systematic risk factors. We construct synthetic portfolios to obtain the empirical distribution of timing coefficients under the null hypothesis of no timing ability and compare this distribution to that of the timing coefficients of the actual funds. Fund managers do not seem to be timing any of the risk factors. For the market factor in particular, we cannot reject the hypothesis that the actual and synthetic fund cross-sectional distributions are the same. We interpret this result as evidence that market timing ability does not persist over long time periods. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page:]
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Publication Type: Dissertations/Theses - Doctoral Dissertations
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A