Fund Tournaments and Asset Bubbles*

Sato, Yuki

doi:10.1093/rof/rfv044

Cited by 20 publications

(5 citation statements)

References 28 publications

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“…Then, we test whether the price-to-earnings ratio (P/E) based on current earnings, the Bond-Stocks Earnings Yield Differential model (BSEYD) and the Cyclically Adjusted Price-to-Earnings ratio (CAPE), accurately predicts downturns in the SHCOMP and SZECOMP indexes. We find that the logarithm of the P/E has successfully predicted crashes over the entire length of the study (1990( for the SHCOMP and 1991( -2016 for the SZECOMP).…”

Section: Introductionmentioning

confidence: 77%

“…The academic literature on bubbles and crashes is well established, starting with studies on bubbles by Blanchard and Watson (1982), Flood et al (1986), Camerer (1989), Allen and Gorton (1993), Diba and Grossman (1988), Abreu and Brunnermeier (2003) and more recently Corgnet et al (2015), Andrade et al (2016) or Sato (2016). A rich literature on predictive models has also emerged.…”

Section: Introductionmentioning

confidence: 99%

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A Tale of Two Indexes: Predicting Equity Market Downturns in China

Lleo

Ziemba

2017

SSRN Journal

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Predicting stock market crashes is a focus of interest for both researchers and practitioners. Several prediction models have been developed, mostly for use on mature financial markets. In this paper, we investigate whether traditional crash predictors, the price-to-earnings ratio, the Cyclically Adjusted Price-to-Earnings ratio and the Bond-Stock Earnings Yield Differential model, predicts crashes for the Shanghai Stock Exchange Composite Index and the Shenzhen Stock Exchange Composite Index.

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Section: Introductionmentioning

confidence: 77%

Section: Introductionmentioning

confidence: 99%

A Tale of Two Indexes: Predicting Equity Market Downturns in China

Lleo

Ziemba

2017

SSRN Journal

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“…4 Basak and Makarov (2014) show that, even when a manager is significantly ahead in the tournament, her investment behaviour and thus portfolio volatility is still influenced by the tournament incentives. In addition, Sato (2015) show the importance of flow-performance relationship and asset bubbles.…”

Section: Introductionmentioning

confidence: 99%

Testing for persistence in US mutual funds’ performance: a Bayesian dynamic panel model

Mamatzakis

Tsionas

2020

Ann Oper Res

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We provide a Bayesian panel model to consider persistence in US funds' performance while we tackle the important problem of errors in variables. Our modelling departs from prior strong assumptions such as error terms across funds being independent. In fact, we provide a novel, general Bayesian model for (dynamic) panel data that is stable across different priors as reported from the mapping of the prior to the posterior of the Bayesian baseline model with the adoption of different priors. We demonstrate that our model detects previously undocumented striking variability in terms of performance and persistence across funds categories and over time, and in particular through the financial crisis. The reported stochastic volatility exhibits a rising trend as early as 2003-2004 and could act as an early warning of future crisis.

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“…A similar finding for fund managers appears in Chevalier and Ellison (1999). See also Guerrieri and Kondor (2012) and Sato (2016). Grantham, in the GMO October 2006 Quarterly Letter (p. 4) and in Barron's of November 6, 2006, later observes that "Great Lakes Dock & Dredge, Hartford Steam Boiler and Twin Disc Clutch made clients feel much worse, apparently, than losing the same money in Avon, IBM and Johnson & Johnson."…”

Section: Discussionmentioning

confidence: 67%

Rationality Rules

Vogel

2021

Financial Market Bubbles and Crashes

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Rationality RulesOf potential relevance to the study of extreme market events are the many models that emerged during the years of research and controversy surrounding the EMH/CAPM. These appear in the literature with colorful bubble name adjectives such as "rational," "exploding," "intrinsic," "churning," and "collapsing," though most begin with neoclassical assumptions of financial theory. 1 Substantial theoretical assumptions and econometric contortions are needed to fit "bubbles" into a conventional rational valuation-model framework. One such crucial assumption in traditional models takes the existence of arbitrage and the "law" of one price (LOOP) as a given feature. This "law"-which need not apply intertemporally and/or if buyers have less than perfect information-says that in efficient markets, all identical goods must have one price and, if not, sellers and buyers will cause convergence toward such a price. 2 It then follows that markets with arbitrage cannot be markets that are in equilibrium. But even the term "rational" is, in the context of such models, typically misspecified, misunderstood, and misapplied. 3 Muth (1961) was the first to explicitly propose a rational expectations hypothesis (REH) approach, which then gained publicity in the 1970s and 1980s as a potentially useful way to model expectations of future events. 4 Rational Expectations

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Fund Tournaments and Asset Bubbles*

Cited by 20 publications

References 28 publications

A Tale of Two Indexes: Predicting Equity Market Downturns in China

A Tale of Two Indexes: Predicting Equity Market Downturns in China

Testing for persistence in US mutual funds’ performance: a Bayesian dynamic panel model

Rationality Rules

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