The Feller diffusion, filter rules and abnormal stock returns

Paul Docherty, Yizhe Dong, Xiaojing Song, Mark Tippett*

*Awdur cyfatebol y gwaith hwn

Allbwn ymchwil: Cyfraniad at gyfnodolynErthygladolygiad gan gymheiriaid


We determine the conditional expected logarithmic (i.e. continuously compounded) return on a stock whose price evolves in terms of the Feller diffusion and then use it to demonstrate how one must know the exact probability density that describes a stock’s return before one can determine the correct way to calculate the abnormal returns that accrue on the stock. We show in particular that misspecification of the stochastic process which generates a stock’s price will lead to systematic biases in the abnormal returns calculated on the stock. We examine the implications this has for the proper conduct of empirical work and for the evaluation of stock and portfolio performance.

Iaith wreiddiolSaesneg
Tudalennau (o-i)426-438
Nifer y tudalennau13
CyfnodolynEuropean Journal of Finance
Rhif cyhoeddi5
Dynodwyr Gwrthrych Digidol (DOIs)
StatwsCyhoeddwyd - 05 Ebr 2017

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