Three Essays on Empirical Asset Pricing in International Equity Markets

Author: Birgit Charlotte Müller

Publisher: Springer Fachmedien Wiesbaden

Book Series : Gabler Theses

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

Table of Contents

About this book

In this Open-Access-book three essays on empirical asset pricing in international equity markets are presented. Despite being of fundamental economic and scientific importance, international financial markets have remained considerably underresearched until today. In the first essay, the role of firm-specific characteristics is analyzed for the momentum effect to exist in international equity markets. The second essay investigates the validity, persistence, and robustness of the newly discovered capital share growth factor across international equity markets as proposed by Lettau et al. (2019) for the U.S. market. Lastly, the third and final essay studies stock market reactions of European vendor banks to distressed loan sale announcements.

Frontmatter

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Kapitel 1. General Introduction

Zusammenfassung

Within the field of capital market research, two diametrically opposed conceptions continue to be prevailing: The efficient market hypothesis by Fama (1970) on the one hand and the behavioral finance approach by Shiller (2003) on the other hand. According to Fama (1970), capital markets are efficient in a sense that current prices of securities incorporate all information available up to that point in time. Consequently, following Fama’s reasoning, there exist no possibilities to gain riskless profits by exploiting mispricings (so-called arbitrage) (Fama, 1970). Shiller (2003), in contrast, puts forward the claim that markets tend to behave irrationally, implying that there indeed exist possibilities to exploit mispricings.

Birgit Charlotte Müller

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Kapitel 2. Cross-Country Composite Momentum

Zusammenfassung

Medium-term price continuation, commonly defined as momentum, is a widespread phenomenon in financial markets. It exists for individual stocks (Jegadeesh and Titman, 1993), for industry sectors (Moskowitz and Grinblatt, 1999), for style portfolios (Lewellen, 2002), in international equity markets (Rouwenhorst, 1998; Chui et al., 2010), and across asset classes (Bhojraj and Swaminathan, 2006; Menkhoff et al., 2012; Asness et al., 2013). Momentum also appears to be persistent over time, at least outside the U.S. stock market (Jegadeesh and Titman, 2001; McLean and Pontif, 2016; Green et al., 2017; Jacobs and Müller, 2020).

Birgit Charlotte Müller

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Kapitel 3. Capital Share Risk in International Asset Pricing

Zusammenfassung

In a seminal study, Lettau et al. (2019) demonstrate that a single macroeconomic factor can explain a wide range of equity and nonequity portfolio returns within the U.S. market. This factor, which is based on the growth in the capital share of aggregate income, is able to outperform, yet even subsume information in well-established factor models as for instance the Fama-French three factor model. The aim of this paper is to study whether the explanatory power of this factor maintains across international equity markets.

Birgit Charlotte Müller

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Kapitel 4. The Pricing of European Non-Performing Real Estate Loan Portfolios

Zusammenfassung

Non-performing loans (NPL), commonly referred to as loans in arrears for at least 90 days, have continuously been characterized as the top priority of the European Central Bank (ECB) and continue to attract central attention (ECB, 2018a,b). With the outbreak of the European debt crisis, the quality of banks’ assets had deteriorated in a manner that, despite robust economic recovery and a variety of regulatory efforts, NPL still today pose a threat to bank and thrift institutions. Against this backdrop, the European regulator requires banks to develop effective strategies for reducing NPL, to set up clear governance and to operate powerful work-out structures (ECB, 2017).

Birgit Charlotte Müller

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Kapitel 5. Concluding Remarks

Zusammenfassung

Despite being of fundamental economic and scientific importance, international financial markets have remained considerably underresearched until today. This thesis presents three essays on empirical asset pricing in international equity markets. In the first essay, the role of firm-specific characteristics is analyzed for the momentum effect to exist. The second essay investigates the validity, persistence, and robustness of the newly discovered capital share growth factor across international markets as proposed by Lettau et al. (2019) for the U.S. market.

Birgit Charlotte Müller

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Backmatter

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Title: Three Essays on Empirical Asset Pricing in International Equity Markets
Author: Birgit Charlotte Müller
Publisher: Springer Fachmedien Wiesbaden
Electronic ISBN: 978-3-658-35479-4
Print ISBN: 978-3-658-35478-7
DOI: https://doi.org/10.1007/978-3-658-35479-4