Earticle

초록

영어

We investigate the effects of arbitrageurs’ behavioral biases on cross-sectional equity returns under the assumption that arbitrageurs are Bayesian optimizers. We find that the profits of various equity neutral hedge portfolios are affected by arbitrageurs’ attitude toward ambiguity to signals. Ambiguity-aversion (Epstein and Schneider, 2008) exists before 2000 for some hedge portfolios whose idiosyncratic volatilities increase at positive signals since the positive signals are interpreted as being ambiguous. However, during the 2000s arbitrageurs interpret positive signals as being clear rather than ambiguous, because positive signals confirm their prior beliefs that the trading strategies are profitable. The excess arbitrage from the misinterpretation of positive signals explains why the profitability of equity neutral hedge portfolios appears to decrease in the 2000s despite the fact that their alphas are still positive and significant.

목차

Abstract
 1. Introduction
 2. Arbitrage Trading under Overconfidence, Ambiguity, and Biased SelfAttribution
  2.1 Basic Setting
  2.2 Posterior Mean and Variance of Alpha
  2.3 Over-confidence, Ambiguity, and Noise Volatility
  2.4 Over-confidence and Volatility of Alpha
  2.5 The Effects of Biased Self-Attribution and Arbitrage Trading on Alpha
 3. Estimation of Alpha and Idiosyncratic Volatility Processes
  3.1 Conditional CAPM Model
  3.2 Estimation Method
 4. Hedge Portfolios
  4.1 Data and the Universe
  4.2 Construction of Hedge Portfolios
  4.3 Basic properties of hedge portfolios
  4.4 How Many Common Factors?
  4.5 Dynamics of time-varying parameters
 5. Psychological Biases and Performance of Hedge portfolios
  5.1 Overconfidence, Ambiguity, and Idiosyncratic Volatility
  5.2 Overconfidence, Ambiguity, Biased Self-attribution, and Alpha
 6. Arbitrage Trading and Performance of Hedge portfolios
  6.1 Out-of-sample Forecasting
  6.2 Has Alpha Been Eroded Away?
  6.3 Excess Arbitrage Trading in the 2000s
 7. Conclusions
 Appendix
 References
 Table
 Figure

키워드

저자

• Min Hwang [ Finance and Real Estate, George Washington University, Washington, DC, USA ]
• Soosung Hwang [ School of Economics, Sungkyunkwan University, Seoul, Korea ]
• Sanha Noh [ School of Economics, Sungkyunkwan University, Seoul, Korea ]

참고문헌

발행기관

간행물

표지보기 관심저널 등록

• 간행물명

  한국재무학회 학술대회

• 간기

  부정기

• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330