Three essays in financial economics.
详细信息
文摘
This dissertation contains three essays in financial economics. In Chapter 1,motivated by the phenomenon that momentum profits vary substantially across different market states,I develop a model to connect market states and momentum profits,and test the models empirical implications. The model applies the mechanism of overconfidence and self-attribution bias into a setting of multiple risky assets with correlated payoffs. The model generates a set of implications regarding the relation between market states and returns on the winner,loser,and momentum portfolios. These implications are consistent with empirical patterns in the literature and those newly documented in this chapter. Overall,this chapter unifies momentum,negative momentum profits under certain market states,and long-run reversals. In Chapter 2,I examine the strategic role of cash in industries with significant R&D,and the variation of cash holdings and R&D intensity across such industries. In the model,firms compete to innovate but must also finance to bring innovations to the market. The first successful launcher of a new product enjoys an advantage. Outside financing takes time. Cash holdings,R&D intensity,and industry concentration are determined endogenously in equilibrium. Both cash holdings and R&D intensity increase with the winners advantage and time delay in outside financing,and decrease with entry costs. Empirical patterns of industry cash holdings and R&D intensity support the model predictions. In Chapter 3,I document that the TED spread is a significant negative predictor of value premium. Over 1990 to 2011,a 1% increase in lagged TED spread predicts a 3.3% decrease of CAPM-adjusted value premium,with an R-squared value of 8.2%. I then argue that this finding is consistent with the mechanism that equity expected returns become lower under tighter credit conditions through shareholders strategic default. I incorporate this mechanism into a simple model of a levered firm and derive more testable hypotheses. Consistent with these hypotheses,I further find that the negative relationship between value premium and lagged TED spread comes mainly from value stocks,stocks with lower credit ratings,stocks with lower cash flows,and stocks with higher shareholders bargaining power and higher liquidation costs.