Asset Pricing

Fact, Fiction, and the Size Effect ArXiv ID: ssrn-3177539 “View on arXiv” Authors: Unknown Abstract In the earliest days of empirical work in academic finance, the size effect was the first market anomaly to challenge the standard asset pricing model and promp Keywords: Size Effect, Asset Pricing, Market Anomalies, Equity Valuation, Small Cap Stocks, Equities Complexity vs Empirical Score Math Complexity: 2.5/10 Empirical Rigor: 8.0/10 Quadrant: Street Traders Why: The paper primarily uses standard statistical tests on public datasets (like CRSP) and factor return data (Fama-French) to empirically dissect the size effect, with minimal advanced mathematical formalism beyond basic regression and performance metrics. flowchart TD A["Research Goal: Investigate the existence<br>and persistence of the Size Effect"] --> B["Data Inputs: Historical equity data,<br>CRSP database, Fama-French factors"] B --> C["Methodology: Portfolio Sorts<br>& Regression Analysis"] C --> D{"Computational Process:<br>Decomposing Size Premium"} D -- "Statistical Testing" --> E["Key Findings: Size Effect is<br>conditional on volatility & liquidity"] D -- "Out-of-Sample Validation" --> E E --> F["Outcome: Small-cap premium<br>diminishes after accounting for<br>risk factors & data snooping"]

Equity Risk Premiums (ERP): Determinants, Estimation and Implications – The 2012 Edition ArXiv ID: ssrn-2027211 “View on arXiv” Authors: Unknown Abstract Equity risk premiums are a central component of every risk and return model in finance and are a key input into estimating costs of equity and capital in both c Keywords: Equity Risk Premium, Cost of Equity, Valuation, Risk Management, Asset Pricing Complexity vs Empirical Score Math Complexity: 3.5/10 Empirical Rigor: 4.0/10 Quadrant: Philosophers Why: The paper focuses on conceptual frameworks, economic determinants, and practical estimation methods (historical, survey, implied) rather than advanced mathematical derivations. It lacks code, backtests, or extensive statistical metrics, emphasizing theoretical discussion and comparison of approaches over empirical implementation. flowchart TD A["Research Goal:<br>Estimate & Analyze ERP for 2012"] --> B{"Methodology"} B --> C["Historical & Survey Data<br>Input: Historical Returns, Risk-free Rates"] B --> D["Computational Process<br>Input: Valuation Multiples & DCF Models"] C --> E["Analysis: Implied ERP<br>Output: Current Market ERP"] D --> E E --> F["Key Outcomes"] F --> G["ERP Sensitivity:<br>Risk aversion & Macro variables"] F --> H["Valuation Impact:<br>Cost of Equity adjustments"]

A Literature Review of the Size Effect ArXiv ID: ssrn-1710076 “View on arXiv” Authors: Unknown Abstract The size effect in finance literature refers to the observation that smaller firms have higher returns than larger firms, on average over long horizons. It also Keywords: Size effect, Small-cap premium, Asset pricing, Equity returns, Fama-French factors, Equities Complexity vs Empirical Score Math Complexity: 2.0/10 Empirical Rigor: 3.0/10 Quadrant: Philosophers Why: The paper is a literature review summarizing existing findings with minimal original mathematical derivations or models, and while it discusses empirical results, it does not present new backtests, datasets, or implementation-heavy analysis. flowchart TD A["Research Goal<br>How does firm size impact equity returns?"] --> B["Methodology<br>Literature Review & Empirical Analysis"] B --> C["Data Sources<br>CRSP, Compustat, Fama-French Datasets"] C --> D["Computational Processes<br>Portfolio Sorts, Regression Analysis, Factor Models"] D --> E["Key Findings<br>Size Effect Exists but Varies by Market & Period"] E --> F["Outcomes<br>Small-Cap Premium Often Captured by HML Factor or Disappears in Large Caps"]

Reconciling Efficient Markets with Behavioral Finance: The Adaptive Markets Hypothesis ArXiv ID: ssrn-1702447 “View on arXiv” Authors: Unknown Abstract The battle between proponents of the Efficient Markets Hypothesis and champions of behavioral finance has never been more pitched, and little consensus exists a Keywords: Efficient Market Hypothesis, Behavioral Finance, Market Efficiency, Asset Pricing, Equities Complexity vs Empirical Score Math Complexity: 3.0/10 Empirical Rigor: 2.0/10 Quadrant: Philosophers Why: The paper presents a high-level conceptual framework (Adaptive Markets Hypothesis) reconciling two established theories with minimal advanced mathematics, relying on qualitative arguments and evolutionary analogies rather than dense models or empirical backtesting. flowchart TD A["Research Goal:<br>Can markets be both<br>efficient and behavioral?"] --> B["Methodology:<br>AMH Framework<br>Adaptive Markets Hypothesis"] B --> C["Input Data:<br>Asset Pricing &<br>Equity Returns"] C --> D["Computation:<br>Event Studies &<br>Statistical Analysis"] D --> E["Key Finding:<br>Market Efficiency is<br>Not Static"] E --> F["Outcome:<br>Efficiency Varies by<br>Conditions & Competition"]

Efficient Markets Hypothesis ArXiv ID: ssrn-991509 “View on arXiv” Authors: Unknown Abstract The efficient markets hypothesis (EMH) maintains that market prices fully reflect all available information. Developed independently by Paul A. Samuelson and Eu Keywords: Efficient Markets Hypothesis (EMH), Market Prices, Information Efficiency, Asset Pricing, Equities Complexity vs Empirical Score Math Complexity: 2.0/10 Empirical Rigor: 3.0/10 Quadrant: Philosophers Why: The paper is a theoretical review of the Efficient Markets Hypothesis with only basic statistical tests and no backtesting or code, focusing on conceptual foundations rather than mathematical derivation or empirical implementation. flowchart TD A["Research Goal: Test if asset prices fully reflect all available information."] --> B{"Methodology: Event Study Analysis"} B --> C["Data/Inputs: Historical price data and public news announcements for equities."] C --> D["Computational Process: Calculate abnormal returns and analyze post-announcement price drift."] D --> E{"Key Findings/Outcomes"} E --> F["Prices adjust rapidly to new information."] E --> G["Predicting future price movements using past data is difficult."] E --> H["Supports the Efficient Markets Hypothesis (EMH)."]

Prima de Riesgo del Mercado: Histórica, Esperada, Exigida e Implícita (Market Risk Premium: Historical, Expected, Required and Implied) ArXiv ID: ssrn-897676 “View on arXiv” Authors: Unknown Abstract Spanish Abstract: La Prima de Riesgo del Mercado es uno de los parámetros financieros más investigados y controvertidos, y también uno de los que más con Keywords: Risk Premium, Asset Pricing, Market Risk, Financial Markets, Spanish Literature, Equities / Market Risk ...

Institutional Investors and Stock Market Volatility ArXiv ID: ssrn-837165 “View on arXiv” Authors: Unknown Abstract We present a theory of excess stock market volatility, in which market movements are due to trades by very large institutional investors in relatively illiquid Keywords: Stock Market Volatility, Institutional Investors, Illiquidity, Asset Pricing, Market Microstructure Complexity vs Empirical Score Math Complexity: 7.5/10 Empirical Rigor: 4.0/10 Quadrant: Lab Rats Why: The paper presents a theoretical model using power-law distributions and optimal trading behavior derived via analytical methods, indicating high math complexity. While it references empirical stylized facts, the excerpt lacks specific data sources, code, or backtesting details, leaning more towards theoretical derivation than empirical implementation. flowchart TD A["Research Question: What causes excess stock market volatility?"] B["Methodology: Theoretical Model & Empirical Analysis"] C["Data: Institutional Trades & Stock Liquidity"] D["Process: Analyze trade impact on price deviations"] E["Key Finding: Large institutional trades drive volatility in illiquid markets"] A --> B B --> C C --> D D --> E

Reconciling Efficient Markets with BehavioralFinance: The Adaptive Markets Hypothesis ArXiv ID: ssrn-728864 “View on arXiv” Authors: Unknown Abstract The battle between proponents of the Efficient Markets Hypothesis and champions of behavioral finance has never been more pitched, and there is little consensus Keywords: Efficient Market Hypothesis, Behavioral Finance, Market Efficiency, Asset Pricing, Equities Complexity vs Empirical Score Math Complexity: 2.0/10 Empirical Rigor: 1.5/10 Quadrant: Philosophers Why: The paper is primarily a conceptual and theoretical synthesis of existing ideas (EMH vs. behavioral finance) using an evolutionary analogy, lacking novel mathematical derivations or heavy empirical backtesting. flowchart TD A["Research Goal:<br>Reconcile EMH with Behavioral Finance"] --> B["Methodology:<br>Empirical Asset Pricing Tests"] B --> C{"Data Inputs:<br>US Equities (CRSP/Compustat)"} C --> D["Computational Process:<br>Estimate Risk-Adjusted Returns"] D --> E{"Outcomes / Findings"} E --> F["Markets are adaptive<br>Efficiency evolves over time"] E --> G["Behavioral anomalies<br>arise from market shocks"] E --> H["Asset pricing models<br>must incorporate adaptiveness"]

The Adaptive Markets Hypothesis: Market Efficiency from an Evolutionary Perspective ArXiv ID: ssrn-602222 “View on arXiv” Authors: Unknown Abstract One of the most influential ideas in the past 30 years is the Efficient Markets Hypothesis, the idea that market prices incorporate all information rationally a Keywords: Efficient Markets Hypothesis, Market Efficiency, Asset Pricing, Informational Efficiency, Financial Theory, Equity Complexity vs Empirical Score Math Complexity: 3.0/10 Empirical Rigor: 2.0/10 Quadrant: Philosophers Why: The paper proposes a conceptual framework (Adaptive Markets Hypothesis) to reconcile EMH and behavioral finance using evolutionary principles, but it lacks mathematical derivations, empirical data, or backtesting details, focusing instead on theoretical exposition and implications for practice. flowchart TD A["Research Goal:<br>Challenge EMH with<br>Evolutionary Perspective"] --> B["Methodology:<br>Literature Review &<br>Theoretical Framework"] B --> C["Input Data:<br>Historical Market Anomalies<br>& Behavioral Studies"] C --> D["Process:<br>Adaptive Markets Hypothesis<br>Integration (Lo 2004)"] D --> E["Key Findings:<br>1. Markets are adaptive<br>2. Efficiency varies<br>3. Profit opportunities<br>fluctuate with evolution"]

Introduction to Fast Fourier Transform inFinance ArXiv ID: ssrn-559416 “View on arXiv” Authors: Unknown Abstract The Fourier transform is an important tool in Financial Economics. It delivers real time pricing while allowing for a realistic structure of asset returns, taki Keywords: Fourier transform, asset pricing, financial economics, time series analysis, real-time pricing, Financial Derivatives Complexity vs Empirical Score Math Complexity: 8.0/10 Empirical Rigor: 3.0/10 Quadrant: Lab Rats Why: The paper involves advanced mathematical concepts like Fourier transforms, complex numbers, and convolution, but it is a conceptual pedagogical piece focusing on methodology rather than providing empirical data, backtests, or implementation details for real-world trading. flowchart TD A["Research Goal: Use Fourier Transform<br>for Real-Time Financial Pricing"] --> B["Key Methodology: Fast Fourier Transform<br>FFT Algorithm"] B --> C["Data Inputs: Asset Return Time Series<br>& Market Data"] C --> D["Computational Process: FFT of<br>Return Distributions to Price Derivatives"] D --> E["Key Findings: Efficient Real-Time Pricing<br>Model for Financial Derivatives"]