TitleMomentum strategies, dividend policy, and asset pricing test
NameChen, Hong-Yi (author), Lee, Cheng-Few (chair), Palmon, Oded (internal member), Kim, Jin-Mo (internal member), John, Kose (outside member), Rutgers University, Graduate School - Newark,
DescriptionThis dissertation includes three essays which investigate momentum strategies, dividend
policy, and asset pricing test. The brief abstracts of these three essays are presented as follows. The first essay investigates the existence of revenue momentum strategy and the interrelationship among revenue, price, and earnings momentum strategies. Empirical
results indicate that prior returns, earnings surprises and revenue surprises each carries some exclusive information content that is not fully priced by the market. This essay also finds that the market generally underestimates the joint information associated with
prior returns, earnings surprises, and revenue surprises. This further leads to a profitable
combined momentum strategy, which exploits all three information and yields a monthly return as high as 1.57%. The second essay studies the theoretical and empirical issues of a firm’s dividend policy. This essay theoretically extends the proposition of DeAngelo and DeAngelo’s (2006) optimal payout policy in terms of the flexibility dividend hypothesis. Using data collected in the U.S. from 1969 to 2009, this essay investigates the impact of growth rate, systematic risk, and total risk on the optimal payout ratio in terms of the fixed-effect
model. Results show that a company will reduce its payout when the growth rate increases for the consideration of flexibility, and a nonlinear relationship exists between the payout ratio and the risk. The theoretical model and empirical results can therefore
be used to identify whether flexibility or the free cash flow hypothesis should be used to determine the dividend policy. The third essay investigates how measurement errors associated to the market rate
of return and estimated beta can affect the capital asset pricing model test. This essay further studies three errors-in-variables estimation models which include grouping method, instrumental variable method, and maximum likelihood method. Using U.S. individual stock and market index data during 1931 to 2009, this essay empirically examines various errors-in-variables estimation methods in testing capital asset pricing
model. Empirical results support the role of the market beta in the capital asset pricing model after adjusted by errors-in-variables models.
NoteIncludes bibliographical references
Noteby Hong-Yi Chen
CollectionGraduate School - Newark Electronic Theses and Dissertations
Organization NameRutgers, The State University of New Jersey
RightsThe author owns the copyright to this work.