Examinando por Autor "Ferrero-Pozo, Ricardo"

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Can the seasonal pattern of consumption growth reproduce habits in the cross-section of stock returns? Evidence from the European equity market
(Routledge Taylor & Francis on line, 2021) Rojo-Suárez, Javier; Alonso-Conde, Ana Belén; Ferrero-Pozo, Ricardo
This paper examines the prevalence for Europe of some well-documented seasonal patterns in consumption data, which allow classic consumption-based asset pricing models to omit an explicit habit specification. We use the Campbell-Cochrane habit model as a reference, proxying habit persistence by the serial correlation of consumer sentiment. Our results show that consumption data for the third and fourth quarters allow the classic power utility function to perform very similarly to the Campbell-Cochrane model, while the serial correlation of consumer sentiment helps improve the explanatory power of habits.
European equity markets: Who is the truly representative investor?
(Elsevier, 2020) Rojo-Suárez, Javier; Alonso-Conde, Ana Belén; Ferrero-Pozo, Ricardo
While most asset pricing models assume the perspective of the representative investor, the globalization of financial markets makes it difficult to know who the investors whose marginal utility determines market prices really are. Since the majority of investment in European financial markets comes from European countries, we study the performance of the consumption-capital asset pricing model (CCAPM) in the equity markets of the three largest European economies: France, Germany and the United Kingdom. For each nation, we price 25 portfolios sorted by size and book-to-market equity, 30 industry portfolios and 25 portfolios sorted by ROE and asset growth, using both domestic and foreign consumption growth as factors. In order to account for the variability of the parameters over time, we employ a scaled factor model, with the domestic consumer confidence index (CCI) and the consumption-wealth ratio (cay) as instruments. We show that the multi-CCAPM scaled by the CCI performs significantly better than the classic CCAPM, providing results comparable to those of the Fama-French five-factor model.
Liquidity, time-varying betas and anomalies: Is the high trading activity enhancing the validity of the CAPM in the UK equity market?
(Wiley, 2022) Rojo-Suárez, Javier; Alonso-Conde, Ana Belén; Ferrero-Pozo, Ricardo
In the last decades, a large number of multifactor assetpricing models have emerged with the aim of correcting the estimated equity risk premiums for some well-documented market anomalies. In any case, recent research on asset pricing shows how the higher liquidity resulting from the globalization of financial markets has significantly reduced returns tied to many strategies based on market anomalies. In this framework, questions arise about the possible renovated validity of classic assetpricing models. On this basis, in this paper we study to what extent the capital assetpricing model (CAPM) has recovered its past explanatory power. Specifically, we propose a time-varying beta CAPM in order to control for the variable nature of beta risk to changes in the market liquidity, using the variation of the Amihud illiquidity measure to account for the degree of trading activity. We test both the time-varying and constant beta models on different sets of anomaly portfolios for the UK equity market, and we compare their performance to that of the Fama–French threeand five-factor models. Additionally, we test the constant beta model on a set of actively managed portfolios, formed according to the variation in market illiquidity in the previous year. Our results show that the pricing errors of the CAPM have significantly decreased with respect to those of previous literature. Furthermore, the time-varying beta model performs similarly to the Fama–French models in most cases. These results are consistent with increased trading activity that reduces arbitrage opportunities and, therefore, enhances market efficiency.