More from these Authors

• Article | Review of Financial Studies | September 2018

  Asset Price Dynamics in Partially Segmented Markets

  Robin Greenwood, Samuel G. Hanson and Gordon Y. Liao

  We develop a model in which capital moves quickly within an asset class but slowly between asset classes. While most investors specialize in a single asset class, a handful of generalists can gradually reallocate capital across markets. Upon the arrival of a large supply shock, prices of risk in the directly impacted asset class become disconnected from those in others. Over the long run, capital flows between markets and prices of risk become more closely aligned. While prices in the directly impacted market initially overreact to the supply shock, we show that prices in related asset classes underreact under plausible conditions. We use the model to assess event-study evidence on the impact of recent large-scale asset purchases by central banks.

  Keywords: System Shocks; Asset Pricing;

  Citation:

  Greenwood, Robin, Samuel G. Hanson, and Gordon Y. Liao. "Asset Price Dynamics in Partially Segmented Markets." Review of Financial Studies 31, no. 9 (September 2018): 3307–3343. (Internet Appendix Here.)  View Details

  CiteView DetailsFind at Harvard Read Now

  Related

• Working Paper | 2018

  Detecting Anomalies: The Relevance and Power of Standard Asset Pricing Tests

  Malcolm Baker, Patrick Luo and Ryan Taliaferro

  The two standard approaches for identifying capital market anomalies are cross-sectional coefficient tests, in the spirit of Fama and MacBeth (1973), and time-series intercept tests, in the spirit of Jensen (1968). A new signal can pass the first test, which we label a “score anomaly,” it can pass the second test as a “factor anomaly,” or it can pass both. We demonstrate the relevance of each to a mean-variance optimizing investor facing simple transaction costs that are constant across stocks. For a risk-neutral investor facing transaction costs, only score anomalies are relevant. For a risk-averse investor facing no transaction costs, only factor anomalies are relevant. In the more general case of risk aversion and transaction costs, both tests matter. In extensions, we derive modified versions of the basic tests that net out anomaly execution costs for situations where the investor faces capital constraints, a multi-period portfolio choice problem, or transaction costs that vary across stocks. Next, we measure the econometric power of the two tests. Time-series factor tests have uniformly lower power than equivalent cross-sectional score tests, with the gap increasing in the in-sample Sharpe ratio of the incumbent factor model. New factor anomalies are successively harder to detect. There is a lower natural limit on the number of anomalies, after which new factors can no longer be verified. Meanwhile, for an investor facing transaction costs, where score anomalies are also applicable, there is a higher natural limit on the number of anomalies that can be statistically validated as relevant.

  Keywords: investment management; asset pricing; anomalies; portfolio construction; transaction costs; Investment; Management; Asset Pricing; Market Transactions; Cost;

  Citation:

  Baker, Malcolm, Patrick Luo, and Ryan Taliaferro. "Detecting Anomalies: The Relevance and Power of Standard Asset Pricing Tests." Working Paper, July 2018.  View Details

  CiteView Details Read Now

  Related

• Case | HBS Case Collection | August 2016 (Revised July 2018)

  Accenture Human Capital Strategy

  Paula A. Price, V.G. Narayanan and James Weber

  Accenture is a leading global consulting, technology, and outsourcing company. It has clients and its own operations throughout the world. This case describes the human resources and related activities necessary to deliver its services to clients. It allows students to explore how Accenture predicts its staffing needs, identifies the necessary skills, identifies how to recruit staff, when to hire them, in what parts of the world, how to develop compensate, and motivate them, how to form them into project teams, and manage the process in a cost effective manner. The case also provides a fictional example of an Accenture project. A potential client has issued a request for proposals to deliver a technology project. Students are asked to create a project team with the right mix of people at a cost that is competitive enough to win the project.

  Keywords: management consulting; technology consulting; outsourcing; human resources; Human Resources; Activity Based Costing and Management; Management Practices and Processes;

  Citation:

  Price, Paula A., V.G. Narayanan, and James Weber. "Accenture Human Capital Strategy." Harvard Business School Case 117-032, August 2016. (Revised July 2018.)  View Details

  CiteView DetailsEducatorsPurchase

  Related