PhD, University of Cincinnati, 2020, Business: Business Administration

Risk plays a central role in financial markets. Households and companies adjust their consumption and investment behaviors, respectively, when facing risk. Financial markets then react to the adjustments accordingly. Whereas a positive risk-return relation is the first fundamental law of finance, however, empirical evidence does not always support such implication. My dissertation focuses on identifying the disagreements between existing asset-pricing theories and empirical evidence, and proposing new explanations that reconcile the disagreements. Essay 1 studies how aggregate consumption responds to macroeconomic shocks. Essay 2 shows how the revisions in aggregate consumption estimates affect the measure of asset prices. Essay 3 demonstrates how financial constraints affect corporate payout and investment policies. Essay 1: Leading consumption-based asset-pricing models have two major implications: First, investors expect higher future stock market returns when the expected stock market volatility increases. Second, stock market prices decrease monotonically with stock market volatility. Neither implication, however, is supported by data. In the first essay, I introduce a consumption-based model featuring two, fear and euphoria, variances to jointly explain the unstable relation between stock market variance and return, and between stock market variance and price. I also present empirical evidence that supports the model implications. Essay 2: We document novel empirical support for the CCAPM. Real-time consumption has significant explanatory power for the cross-section of expected stock returns, while previous studies have found elusive results using revised latest-vintage data. We also lends support to Kroencke's (2017) conjecture that the Bureau of Economic Analysis filters consumption data by showing that it does so gradually through revisions. The revised data perform poorly in the CCAPM estimation because they are heavily filtered and contain substant (open full item for complete abstract)

Committee: Hui Guo Ph.D. (Committee Chair); Brian Hatch Ph.D. (Committee Member); Hernan Moscoso Boedo Ph.D. (Committee Member) Subjects: Business Administration

PhD, University of Cincinnati, 2013, Business: Business Administration

This dissertation studies liquidity and its relationship with stock returns and real estate markets. Liquidity has wide ranging effects on financial markets and the financial crisis highlighted the important role played by liquidity in finance and real estate markets. The objective of this dissertation research is to examine the characteristics of liquidity in different financial markets and to study the effect of innovations in liquidity on stock return volatility. First, using high-frequency trading data on publicly-traded real estate investment trusts (REITs) and trading data on commercial real estate assets, we document the transmission of a liquidity shock from public to private markets. Furthermore we examine the relationship between liquidity in real estate markets (both public and private markets) and macroeconomic variables. We also show how the transmission mechanism differs between public and private markets. Second, using revisions to equity analyst consensus forecasts to measure cash-flow news directly, we are able to study the relationship between innovations in liquidity and stock-return volatility under the return-decomposition framework. We contend that both cash-flow news and expected return news correlate with liquidity shocks, and the cash-flow news component is a nontrivial channel through which liquidity correlates with stock returns. This dissertation research aims to fill in the gaps in the existing empirical literature on liquidity and sheds light on the important relationship between liquidity and stock returns.

Committee: Shaun Bond Ph.D. (Committee Chair); Brian Hatch Ph.D. (Committee Member); Steve Slezak Ph.D. (Committee Member); Nicolas Williams Ph.D. (Committee Member) Subjects: Business Administration

Doctor of Philosophy, The Ohio State University, 2009, Business Administration

The first essay in the dissertation analyzes the structure and attributes of subprime mortgage-backed securitization deals originated between 1997 and 2007. Our data set allows us to link loan-level data for over 6.7 million subprime loans to the securitization deals into which the loans were sold. We show that the securitization process, including the assignment of credit ratings, provided incentives for securitizing banks to purchase loans of poor credit quality in areas with high rates of house price appreciation. Increased demand from the secondary mortgage market for these types of loans appears to have facilitated easier credit in the primary mortgage market. To test this hypothesis, we identify an event which represents an external shock to the relative demand for subprime mortgages in the secondary market. We show that following the SEC's adoption of rules reducing capital requirements on certain broker dealers in 2004, five large deal underwriters disproportionately increased their purchasing activity relative to competing underwriters in ZIP codes with the highest realized rates of house price appreciation but lower average credit quality. We show that these loans subsequently defaulted at marginally higher rates. Finally, using the event as an instrument, we demonstrate a causal link between the demand for mortgages in the secondary mortgage market and the supply of subprime credit in the primary mortgage market. The second dissertation essay examines the corporate governance of international real estate firms. With the passage of real estate investment trust (REIT) legislation in numerous countries around the world, more public and private real estate firms can choose between organizing themselves as a REIT, or a real estate operating company (REOC). REITs pay virtually all net income to shareholders in the form of dividends and are regulated in their investment policy, leverage, ownership, and operations to varying degrees. This paper considers the poss (open full item for complete abstract)

Committee: Andrew Karolyi PhD (Committee Chair); Michael Weisbach PhD (Committee Member); Anil Makhija PhD (Committee Member); Karl Diether PhD (Committee Member) Subjects: Finance