Behavioral Finance and Technical Analysis参考.ppt

CHAPTER 12 Behavioral Finance and Technical Analysis Survivorship Bias Estimating risk premiums from the most successful country and ignoring evidence from stock markets that did not survive for the full sample period will impart an upward bias in estimates of expected returns. The high realized equity premium obtained for the United States may not be indicative of required returns. Liquidity and the Equity Premium Puzzle Part of the equity premium is almost certainly compensation for liquidity risk rather than just the (systematic) volatility of returns. Ergo, the equity premium puzzle may be less of a puzzle than it first appears. Behavioral Explanations of the Equity Premium Puzzle Barberis and Huang explain the puzzle as an outcome of irrational investor behavior. The premium is the result of narrow framing and loss aversion. Investors ignore low correlation of stocks with other forms of wealth Higher risk premiums result Overview of Investigation A multifactor capital market usually is postulated. A broad market index (e.g. the SP 500) represents one of the factors. Well diversified portfolios are often substituted for individual securities. To overcome CAPM testing difficulties: The Index Model and the Single-Factor APT Expected Return-Beta Relationship Estimating the SCL Tests of the CAPM Tests of the expected return beta relationship: First Pass Regression Estimate beta, average risk premiums and nonsystematic risk Second Pass Use estimates from the first pass to see if model is supported by the data SML slope is “too flat” and intercept is “too high”. Single Factor Test Results Return % Beta CAPM Estimated SML Roll’s Criticism The only testable hypothesis is whether the market portfolio is mean-variance efficient. Sample betas conform to the SML relationship because all samples contain an infinite number of ex post mean-variance efficient portfolios. CAPM is not testable unless we know the exact composition of the true market portfolio a