Essays on Empirical Asset Pricing


Roy Verbeek
  • Speaker
Rotterdam School of Management (RSM), Erasmus University Rotterdam

Event Information

Type
PhD Defence
Programme
Finance
Date
Thu. 7 Dec. 2017
Contact
Roy Verbeek
Time
13:30-15:00
Location
Senate Hall, Erasmus Building, Woudestein Campus


Abstract

This dissertation consists of three essays on empirical asset pricing.

In the first essay, I investigate whether common risk factors are priced across investment horizons. I show that only the market and size factors are priced, but only up to sixteen months. The results highlight the importance of horizon effects in the pricing of systematic risk. They also raise concerns about the ability of asset pricing models to price individual stocks.

In the second essay, I estimate costs of equity capital for individual firms and industries using five models. I show that there is considerable disagreement about costs of equity capital across the models and that they are estimated with great errors. The models exhibit some forecasting power for future returns only when the estimation errors are small. My results raise questions about whether popular asset pricing models can be used for computing costs of equity capital.

In the third essay, I show that firms differ greatly in the extent to which their stock prices are driven by cash flow news versus discount rate news. The differences in their relative importance are associated with differences in firm characteristics, risk exposures, and expected returns. I also show that the amount of return co-movement and the success of variables that predict the equity premium depend on the relative importance of the two components.

Mathijs van Dijk
Endowed Professor of Business Administration, with particular reference to Financial Markets
  • Promotor
Mathijs Cosemans
Associate Professor of Finance
  • Member Doctoral Committee
Dick van Dijk
Professor of Econometrics (Finance)
  • Member Doctoral Committee
Bruno Gerard
Bruno Gerard
  • Member Doctoral Committee
Marta Szymanowska
Associate Professor of Finance
  • Daily Supervisor