報告1：Risk Neutral Skewness and the Cross-section of Stock Returns—Mispricing or Information
Abstract: We document a robust positive relation between risk neutral skewness (RNS) and cross-section of stock returns. This positive RNS-return relation is statistically significant and economically large across various frequencies of forming and holding RNS portfolios. We find that RNS predictability peaks at weekly level, and sequentially reduces but stays significant up to quarterly level. This positive RNS-return relation is more pronounced for stocks with higher limit-to-arbitrage cost, but cannot be fully explained by limit-to-arbitrage. Using Stambaugh, Yu and Yuan (2015) firm level mispricing measures, we find high (low) RNS stocks are relatively more overpriced (underpriced). This indicates the positive RNS-return relation is less likely driven by mispricing channel. We document evidences that information/informed trading is a possible mechanism that drives this RNS-return relation. Using earnings announcement as a natural experiment, we demonstrate that pre-announcement RNS and RNS run-up is able to predict announcement day and post announcement cumulative abnormal returns. Comparing with prior studies, our results are based on large comprehensive cross-sectional coverage, and more rigours approach to extract RNS from option contracts.
Department of Finance, Deakin Business School, Deakin University, Australia
報告2：Price Discovery in Capital Structure Arbitrage
Abstract:We incorporate price discovery between observed and implied credit default swap (CDS) spreads into capital structure arbitrage (CSA). The mispricing is estimated as a cointegrating variable, and capital is allocated between equity and CDS positions based on how the mispricing is expected to error-correct over time. Both are key issues in CSA, but prior studies have ignored their substantial cross-sectional and time-series variations. Our price discovery approach to CSA is consistent with Liu and Timmermann (2013), whose theoretical optimal weights in a convergence trade strategy are functions of error-correction coefficients. Compared to Yu (2006) and Duarte et al. (2007), our CSA generates fewer executed trades, higher convergence ratios, shorter time to convergence, and lower tail risk. However, we find limited evidence of profitability. Between 2006-2009, none of the CSA trading configurations are profitable. To address the impact of the 2008 financial crisis, we extend the trading period to 2010-2016, and find some evidence of improved profitability. Only one CSA strategy yields a statistically significant average monthly return of 1.06%, a Sharpe Ratio of 1.18, and outperforms a delta-neutral CSA. Our trading results suggest that any potential CSA profitability is likely to be absorbed by transaction cost.
The International Business School Suzhou (IBSS) at Xian-Jiaotong Liverpool University (XJTLU)
時間🧟♀️：2017年9月21日（星期二），14:00-17:00
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