• The Journal of Asian Finance, Economics and Business
• /
• v.7 no.9
• /
• pp.117-123
• /
• 2020

The objective of this study is to examine whether the four-factor model explains variation in the expected return of stocks on the Stock Exchange of Thailand. The study used individual monthly data for all stock with continuous trading on the Stock Exchange of Thailand. The study used sample data of 429 listed stocks to construct 8 portfolios bases on the industries. In this study, subject to market factors such as size, the book-to-market ratio, the market beta, and stock liquidity are taken into account. The Empirical analysis reveals that not all of the variables included in the four-factor asset pricing model are statistically significant to do affect the formation of the rate of return on stocks calculated on a monthly basis. The result shows that market beta, stock liquidity, and the book-to-market ratio has a significant increase in the rate of return on shares listed on the Consumer Products. It is therefore apparent that at least in respect of monthly analysis, the predictions of bass models in the field of modern finance theory systematic risk measured by the beta coefficient did play a significantly important role in the formation of the rate of return on the Stock Exchange of Thailand.

• The Journal of Asian Finance, Economics and Business
• /
• v.8 no.3
• /
• pp.717-729
• /
• 2021

This paper examines the efficacy of the default risk factor in an emerging market context using the Fama-French five-factor model. Our aim is to test whether the Fama-French five-factor model augmented with a default risk factor improves the predictability of returns of portfolios sorted on the firm's characteristics as well as on industry. The default risk factor is constructed by estimating the probability of default using a hybrid version of dynamic panel probit and artificial neural network (ANN) to proxy default risk. This study also provides evidence on the temporal stability of risk premiums obtained using the Fama-MacBeth approach. Using a sample of 3,806 firm-year observations on non-financial listed companies of Pakistan over 2006-2015 we found that the augmented model performed better when tested across size-investment-default sorted portfolios. The investment factor contains some default-related information, but default risk is independently priced and bears a significantly positive risk premium. The risk premiums are also found temporally stable over the full sample and more recent sample period 2010-2015 as evidence by the Fama-MacBeth regressions. The finding suggests that the default risk factor is not a useless factor and due to mispricing, default risk anomaly prevails in the Pakistani equity market.

• Korean Management Science Review
• /
• v.31 no.1
• /
• pp.27-40
• /
• 2014

Tour products have been recognized as a perishable asset. For tour operation companies (TOCs), improving profitability is a core decision problem for their business. Since package tour products, typical products of TOCs, are perishable after the tour was departed, TOCs have been tried to increase their sales before the departure date with various marketing strategies including price discounts. The pricing problem for perishable assets have been studied in Revenue Management for a long time. However, it is hard to find a research on pricing decisions for tour products. In this paper, we focus on a pricing problem for tour products. In particular, we will consider the pricing scheme with customer preference values on purchasing conditions. With conjoint analysis, we can use the part-worth value as a preference value for each level of purchasing conditions. To construct various discount prices, we use an enumeration method and suggest a mathematical optimization model. With experimental analysis for a sample tour package, we will show that our pricing process is very helpful for designing customer-oriented pricing decision.

• Management Science and Financial Engineering
• /
• v.19 no.1
• /
• pp.49-52
• /
• 2013

In this paper we provide a valuation formula for a variance swap with regime switching. A variance swap is a forward contract on variance, the square of realized volatility of the underlying asset. We assume that the volatility of underlying asset is governed by Markov regime-switching process with finite states. We find that the proposed model can provide ease of calculation and be superior to the models currently available.

• Journal of applied mathematics & informatics
• /
• v.38 no.5_6
• /
• pp.439-461
• /
• 2020

A step-up option is a newly developed financial instrument that simultaneously provides higher security and profitability. This paper introduces two step-up options: step-up type1 and step-up type2 options, and derives the option pricing formulas using the Laplace transform. We assume that the underlying equity price follows a regime-switching model that reflects the long-term maturity of these options. The option prices are calculated for the two types of funds, a pure stock fund composed of risky assets only and a mixed fund composed of stocks and bonds, to reflect possible variety in the fund underlying asset mix. The impact of changes in the model parameters on the option prices is analyzed. This paper provides information crucial to product developments.

• Management & Information Systems Review
• /
• v.26
• /
• pp.1-26
• /
• 2008

Since Capital Asset Pricing Model(CAPM) was proposed in the early 1960s by William Sharpe(1964) and John Lintner(1965) researchers have investigated the validity of the model. The results of empirical researches do not show that expected returns of stocks seem to be determined solely by systematic risk of the stocks as precicted by CAPM. In this paper the relationship between transaction volume and expected returns of stocks was investigated. Empirical cross-sectional analysis about the data collected from Stock Market of Korea Exchange shows transaction volume and variability of stock returns play an important role in pricing assets. The well-known variables which were used traditionally to explain the differences of expected returns among stocks such as the size and beta of a stock seems to be unimportant in pricing assets.

• The Journal of Asian Finance, Economics and Business
• /
• v.8 no.2
• /
• pp.711-724
• /
• 2021

The purpose of this paper is to investigate the profitability of the momentum effects on the Oman Stock Market (OSM). This study uses the monthly returns of all stocks listed on the OSM, with a total of 107 companies used in the study for the period from 2005 to 2018. According to the methodology developed by Jegadeesh and Titman (1993), this study builds momentum portfolios based on various sizes. Moreover, the January effect is also examined to recognize if this effect is related to the momentum effect. The results find that there is evidence of momentum returns and these returns are statistically and economically significant. The sub-periods confirmed the profitability of the momentum strategy. This paper shows that momentum returns are evident at different sizes; big, medium, and small-sized portfolios. Besides, the result shows that the classic January effect does not play an important role in the momentum returns. Thus, the implication is that the momentum should not take into account the annual, seasonal, and size returns. The capital asset pricing model (CAPM) or the three-factor model cannot explain momentum returns generated by individual stocks in the Oman Stock Market. These results are useful to academia and investors alike.

• The Korean Journal of Applied Statistics
• /
• v.27 no.6
• /
• pp.959-973
• /
• 2014

Asset pricing models that account for asymmetric volatility in asset prices have been recently proposed. This article presents an efficient Bayesian method to analyze asset-pricing models. The method is developed by devising a partially collapsed Gibbs sampler that capitalizes on the functional incompatibility of conditional distributions without complicating the updates of model components. The proposed method is illustrated using simulated data and applied to daily S&P 500 data observed from September 1980 to August 2014.

• Journal of the Korean Society for Industrial and Applied Mathematics
• /
• v.18 no.1
• /
• pp.61-74
• /
• 2014

This paper presents accurate and efficient numerical methods for calculating the sensitivities of two-asset European options, the Greeks. The Greeks are important financial instruments in management of economic value at risk due to changing market conditions. The option pricing model is based on the Black-Scholes partial differential equation. The model is discretized by using a finite difference method and resulting discrete equations are solved by means of an operator splitting method. For Delta, Gamma, and Theta, we investigate the effect of high-order discretizations. For Rho and Vega, we develop an accurate and robust automatic algorithm for finding an optimal value. A cash-or-nothing option is taken to demonstrate the performance of the proposed algorithm for calculating the Greeks. The results show that the new treatment gives automatic and robust calculations for the Greeks.

• Bulletin of the Korean Mathematical Society
• /
• v.56 no.2
• /
• pp.351-364
• /
• 2019

We derive full closed-form expressions for the prices of European symmetric power quanto call options with four different forms of terminal payoffs under the assumption of the classical lognormal asset price and exchange rate model.