FINC314 Lecture Notes - Lecture 21: Stok, Systematic Risk, Full Moon
31 Jan 2017
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This twenty-first and final exploratory note of the first half of class covers a fair amount of ground. First, the (cid:374)ote addresses rolf ba(cid:374)z"s (cid:1005)(cid:1013)(cid:1012)(cid:1004) paper, (cid:862)the relatio(cid:374)ship bet(cid:449)ee(cid:374) retur(cid:374) a(cid:374)d market value of. Co(cid:373)(cid:373)o(cid:374) to(cid:272)ks,(cid:863) (cid:449)hi(cid:272)h highlights, for the first time, the size effect. Second, the note digresses a bit, in context of the potential arbitrage opportunity presented in banz (1980), and discusses conglomeration and de-(cid:272)o(cid:374)glo(cid:373)eratio(cid:374) i(cid:374) (cid:272)o(cid:374)te(cid:454)t of the (cid:272)ou(cid:374)tr(cid:455)"s histor(cid:455) of (cid:373)erger (cid:449)a(cid:448)es. Third, the (cid:374)ote addresses the phenomenon of momentum and utilizes the literature of narasimhan jegadeesh and sheridan. Finally, the note closes with a brief look at the groundbreaking 1992 paper of (newly-crowned. No(cid:271)el laureate(cid:895) euge(cid:374)e fa(cid:373)a a(cid:374)d ke(cid:374)(cid:374)eth fre(cid:374)(cid:272)h, (cid:862)the cross- e(cid:272)tio(cid:374) of e(cid:454)pe(cid:272)ted to(cid:272)k retur(cid:374)s. (cid:863) Rolf ba(cid:374)z"s (cid:1005)(cid:1013)(cid:1012)(cid:1004) journal of financial economics paper, (cid:862)the relatio(cid:374)ship bet(cid:449)ee(cid:374) return and market. Value of co(cid:373)(cid:373)o(cid:374) to(cid:272)ks,(cid:863) is si(cid:373)ple (cid:894)(cid:271)(cid:455) (cid:272)o(cid:374)te(cid:373)porar(cid:455) sta(cid:374)dards(cid:895), (cid:271)ut e(cid:454)tre(cid:373)el(cid:455) i(cid:374)sightful.
