TitleThree essays of firm's fundamentals and asset pricing
NameShih, Wei-Kang (author), Lee, Cheng-Few (chair), Govindaraj, Suresh (co-chair), Chen, Ren-Raw (internal member), Kim, Jin-Mo (internal member), Lee, Picheng (internal member), Tandon, Kishore (outside member), Rutgers University, Graduate School - Newark,
Stock price forecasting,
DescriptionIn my dissertation research, I have three essays discussing the firm’s fundamentals and their asset pricing implications. In the first essay entitled “Alternative Equity Valuation Models”, we use simultaneous equations estimation and combined forecasting methods to examine future stock prices forecast ability of Ohlson (1995) Model, Feltham and Ohlson (1995) Model, and Warren and Shelton (1971) Model. We also investigate whether comprehensive earnings can provide incremental price-relevant information beyond net income. Overall, we find that the simultaneous equations estimation procedure can produce more accurate future stock price forecasts than the traditional single equation estimation method, and combined forecast method can further reduce the prediction errors by using combination of individual forecasts. We also find supporting evidence that investors can use comprehensive earnings to more accurately forecast future stock prices in these valuation models. My second essay entitled “Technical, Fundamental, and Combined Information for Separating Winners from Losers” jointly use fundamental and technical information to improve the technical momentum strategy. We examine how fundamental accounting information can be used to supplement the technical information, such as past returns and past trading volume data, to separate momentum winners from losers. More specifically, we propose a unified framework of incorporating fundamental indicators FSCORE (Piotroski, 2000) and GSCORE (Mohanram, 2005) into the technical momentum strategy. Our empirical results suggest that the combined momentum strategy outperforms technical momentum strategy for both growth and value stocks. My third essay entitled “The Economic Consequences of Real Earnings Management” examines how real activities based earnings management affect firm’s payout and investment decisions. Our paper focuses on real earnings management in a general equilibrium production (GEP) economy setting, and studies the economic implications of this phenomenon on the economy. To formalize the notion of real earnings management, we propose that risk-averse managers "manage" earnings through investment-payout decisions that are conditioned by their history and habits. In addition, we permit habits to change randomly which introduces another source of risk. We explicitly solve for the endogenous asset prices and interest rate, and show how this additional risk from managerial habits is priced in the production economy.
NoteIncludes bibliographical references
Noteby Wei-Kang Shih
CollectionGraduate School - Newark Electronic Theses and Dissertations
Organization NameRutgers, The State University of New Jersey
RightsThe author owns the copyright to this work.