Duration-Driven Returns

Gormsen, Niels Joachim; Lazarus, Eben

doi:10.2139/ssrn.3359027

Cited by 23 publications

(12 citation statements)

References 37 publications

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“…It means that DJI's effects are higher than that of the Brent oil price against JKSE prices. The results of this study follow the implications of the price theory of asset (assets pricing theories), which believes that there is economic shock causing the price of the moving asset, although some research states it is challenging to know which asset price is the first to be influential (Cutler et al, 1989;Gormsen & Lazarus, 2020).…”

Section: Resultssupporting

confidence: 59%

Does the Covid-19 Pandemic Affect the Stock Market in Indonesia?

Rahmayani

Oktavilia

2021

JSP

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This study aimed to analyze the existence and effect of the Covid-19 pandemic on the stock market over the long-term and short-term in Indonesia. The study followed Krugman’s (1979) approach stating the pandemic crisis problems have the potential to decrease the performance of the international balance of payments which will ultimately lead to uncertainty in the market. The research method was the Error Correction Model (ECM) with stock markets as an endogenous variable; and exchange rate, inflation, interest rate, foreign stock markets, commodity price, and pandemic as exogenous variables. The pandemic indicator was measured by total accumulative cases of Covid-19 per day in Indonesia. Using ECM, the result showed that foreign interest rates and commodity prices positively affect the stock markets. Conversely, the exchange rate has a negative effect on the stock markets. However, the estimation fails to reflect the significant impact of the Covid-19 pandemic in the short-term, but it has a negative effect on stock markets in the long-term. This result implies that the higher total accumulative cases of Covid-19 has been the source of Indonesia’s stock market weakness in the long-term. To the best of the author’s knowledge, this study is the first to examine Indonesia’s stock market’s pandemic impact between the short term and long term.

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Section: Resultssupporting

confidence: 59%

Does the Covid-19 Pandemic Affect the Stock Market in Indonesia?

Rahmayani

Oktavilia

2021

JSP

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“…Similar to Dechow, Sloan, and Soliman [2004], Weber [2018] further finds that these returns are not explained by Fama and French [2015] risk factors. In contrast, Goncalves [2020] and Gormsen and Lazarus [2019] argue that the duration factor could be driven by a risk premium on near‐term cash flows and find that risk‐adjusted returns are higher on near‐term cash flows than on more distant cash flows. Thus, there is mixed evidence on whether differential returns to the duration factor reflect risk or mispricing.…”

Section: Background and Hypothesis Developmentmentioning

confidence: 99%

Implied Equity Duration: A Measure of Pandemic Shutdown Risk

Dechow

Erhard

Sloan

et al. 2021

J of Accounting Research

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Implied equity duration was originally developed to analyze the sensitivity of equity prices to discount rate changes. We demonstrate that implied equity duration is also useful for analyzing the sensitivity of equity prices to pandemic shutdowns. Pandemic shutdowns primarily impact short‐term cash flows, thus they have a greater impact on low‐duration equities. We show that implied equity duration has a strong positive relation to U.S. equity returns and analyst forecast revisions during the onset of the 2020 COVID‐19 shutdown. Our analysis also demonstrates that the underperformance of “value” stocks during this period is a rational response to their lower durations.

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“…Finally, we note that our model implications correspond to the unconditional slope of the term structure of equity risk premia. Recent empirical studies look at the shape of the conditional term structure by studying the time-variation and trends in this term structure (e.g., Gormsen (2018), Gormsen and Lazarus (2020)). Due to the simplicity of our model (i.e., standard CRRA preferences and i.i.d.…”

Section: Term Structure Of Equity Risk Premiamentioning

confidence: 99%

Stock Market and No‐Dividend Stocks

Atmaz¹,

Basak²

2021

The Journal of Finance

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We develop a stationary model of the aggregate stock market featuring both dividendpaying and no-dividend stocks within a familiar, parsimonious consumption-based equilibrium framework. We find that such a simple feature leads to profound implications supporting several stock market empirical regularities that leading consumption-based asset pricing models have difficulty reconciling. Namely, the presence of no-dividend stocks in the stock market leads to a lower correlation between stock market returns and the aggregate consumption growth rate, a nonmonotonic and even negative relation between the stock market risk premium and its volatility, and a downward-sloping term structure of equity risk premia.THE AGGREGATE STOCK MARKET CONTAINS both dividend-paying and nodividend stocks. 1 Existing asset pricing models, however, overlook this composition and typically model the stock market as being made up of only dividendpaying stocks. We provide the first general equilibrium model of the stock market in which both types of stocks coexist. We show that this simple feature leads to profound implications that support several empirical regularities of the stock market that leading consumption-based asset pricing models such as the habit-formation model (Campbell and Cochrane (1999)), the long-run risk

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Duration-Driven Returns

Cited by 23 publications

References 37 publications

Does the Covid-19 Pandemic Affect the Stock Market in Indonesia?

Does the Covid-19 Pandemic Affect the Stock Market in Indonesia?

Implied Equity Duration: A Measure of Pandemic Shutdown Risk

Stock Market and No‐Dividend Stocks

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