An Investigation on the nature of the idiosyncratic risk of stock portfolios

Download

index.pdf

Date

2018

Author

Kocaarslan, Barış

Metadata

Show full item record

Item Usage Stats

248
views

66
downloads

In this study, based on sound economic theories, two economic transmission channels are identified to investigate the impacts of changes in funding liquidity conditions in interbank loan markets and the reserve currency (US dollar) value on the idiosyncratic portfolio-level risks. Controlling for business cycles, we find that a deterioration in funding liquidity conditions increases the idiosyncratic risk of high-risk portfolios more than that of less risky portfolios. This increase is stronger when the idiosyncratic risks contain uncertainty information about major financial and commodity markets. Furthermore, similar to this finding, the idiosyncratic risk of portfolios (especially the high-risk ones) is considerably enhanced by the increases in US dollar value against major foreign currencies when uncertainty about the major markets is taken into consideration.

Subject Keywords

Portfolio management., Liquidity (Economics)., Stock exchanges., Capital market., Money market.

URI

http://etd.lib.metu.edu.tr/upload/12622574/index.pdf
https://hdl.handle.net/11511/27763

Collections

Graduate School of Social Sciences, Thesis

Suggestions

OpenMETU
Core

An Empirical model of the international cost of equity Uzunkaya, Mehmet; Küçükkaya, Halit Engin; Department of Business Administration (2015) The aim of the study is to propose an empirical model of the international cost of equity by investigating and analyzing the long-run relation between disaggregated country risk ratings and country stock market index returns for a large panel of countries. The study tests the hypothesis that, given the available theoretical and empirical evidence, country risk ratings and country stock market index returns should move together in the long-run and there should be a long-run equilibrium between them; thus cou...
An Analysis of momentum and mean reversion effects on equity indices Özbilge, Armağan; Yolcu Okur, Yeliz; Nazlıben, Kamil Korhan; Department of Financial Mathematics (2015) Momentum and mean-reversion effects have become very popular in finance literature for the last two decades since their presence can generate abnormal profit patterns by applying either relative strength or contrarian trading strategy accordingly. Even though there are some common factor explanations for return reversals, they might not provide the full picture for return persistence. In our theoretical framework, we analyse some of the well-known discrete time momentum studies including the initial one and...
Information in the financial news: effect of market commentary on stock market performance Giray, Aynur; Danışoğlu, Seza; Department of Business Administration (2012) This paper studies the effect of investment sentiment on asset prices. A sentiment proxy is calculated by performing content analysis on the Wall Street Journal‘s "Heard on the Street‘ columns. This proxy is extracted by the principal component analysis of the word tags from the Harvard psychological dictionary that is used by the content analysis software General Inquirer. The relationship between stock prices, trading volume and the media sentiment proxy is estimated within the VAR context. Results sugges...
Modeling co-movements among financial markets: applications of multivariate autoregressive conditional heteroscedasticity with smooth transitions in conditional correlations Öztek, Mehmet Fatih; Öcal, Nadir; Department of Economics (2013) The main purpose of this thesis is to assess the potential of emerging stock markets and commodity markets in attracting the attention of international investors who utilize various portfolio diversification strategies to reduce the cumulative risk of their portfolio. A successful portfolio diversification strategy requires low correlation among financial markets. However, it is now well documented that the correlations among financial markets in developed countries are very high and hence the benefits of i...
A Test of multi-index asset pricing models: the case of Istanbul Stock Exchange Kalaç, Sırrı Selim; Danışoğlu, Seza; Department of Business Administration (2012) This study employs widely excepted asset pricing models to test their explanatory power in the context of Istanbul Stock Exchange listed companies between 1990 and 2010. The risk factors, beta, size, book-to-market equity, and momentum are used to form portfolios and their factor loadings are estimated. The results of this study are mostly in line with the previous academic research, and some unique attributes of the return generation mechanism of Istanbul Stock Exchange are reported.

Citation Formats

B. Kocaarslan, “An Investigation on the nature of the idiosyncratic risk of stock portfolios,” Ph.D. - Doctoral Program, Middle East Technical University, 2018.