Tuesday, September 3rd @ 11:00-12:30 PM (1011 Evans Hall)
Does the Leverage Effect Affect the Distribution of Return?
Dangxing Chen, UC Berkeley
The leverage effect refers to the generally negative correlation between the return of an asset and the changes in its volatility. There is broad agreement in the literature that the effect should be present, and it has been consistently found in empirical work. However, a few papers have pointed out a puzzle: the return distribution of many...
Tuesday, September 10th @ 11:00-12:30 PM (1011 Evans Hall)
Towards theoretical understanding of large batch training in stochastic gradient descent
Xiaowu Dai, UC Berkeley
Stochastic gradient descent (SGD) is almost ubiquitously used in training non-convex optimization tasks. Recently, a hypothesis by Keskar et al. (2017) that large batch SGD tends to converge to sharp minima has received increasing attention. We justify this hypothesis by providing new properties of SGD in both...
Tuesday, September 24th @ 11:00-12:30 PM (1011 Evans Hall)
Self-excited Black-Scholes models for option pricing
Alec Kercheval, Florida State University
Beginners first learn to price stock options with a simple binomial tree model for random price changes. It is well known that this classical one-dimensional random walk converges weakly to Brownian motion in the proper space-time scaling limit. Actual stock prices changes occur not at regular times but at random times according to...
Tuesday, September 17th @ 11:00-12:30 PM (1011 Evans Hall)
Characteristics of Mutual Fund Portfolios: Where Are the Value Funds?
Martin Lettau, UC Berkeley
This paper provides a comprehensive analysis of portfolios of active mutual funds, ETFs and hedge funds through the lens of risk (anomaly) factors. We show that these funds do not systematically tilt their portfolios towards profitable factors, such as high book-to-market (BM) ratios, high momentum, small size, high profitability...
Tuesday, September 24th @ 11:00-12:30 PM (1011 Evans Hall)
Self-excited Black-Scholes models for option pricing
Alec Kercheval, Florida State University
Beginners first learn to price stock options with a simple binomial tree model for random price changes. It is well known that this classical one-dimensional random walk converges weakly to Brownian motion in the proper space-time scaling limit. Actual stock prices changes occur not at regular times but at random times according to...
Tuesday, October 1st @ 11:00-12;30 PM (Evans Hall)
Private Company Valuations by Mutual Funds
Ayako Yasuda, UC Davis
Mutual funds that invest in private securities value those securities at stale prices. Prices change on average every 2.5 quarters, vary across fund families, and are revised upward dramatically at follow-on funding events. The infrequent, but dramatic price changes yield predictably large fund returns. Fund investors can exploit the stale...
Tuesday, November 19th @ 11:00-12:30 PM (1011 Evans Hall)
The Ratio Problem
Frank Partnoy, UC Berkeley
ABSTRACT: We describe two problems – omitted variable bias and measurement error – that arise when a ratio is the dependent variable in a linear regression. First, we show how bias can arise from the omission of two variables based on a ratio’s denominator, and we describe tests for the degree of bias. As an example, we show that the familiar “inverse U” relationship between...
ABSTRACT: We describe two problems – omitted variable bias and measurement error – that arise when a ratio is the dependent variable in a linear regression. First, we show how bias can arise from the omission of two variables based on a ratio’s denominator, and we describe tests for the degree of bias. As an example, we show that the familiar “inverse U” relationship between managerial ownership and Tobin’s Q is reversed when omitted variables are included. Second, we show how measurement error in the ratio denominator can lead to bias. We urge caution about using ratios as dependent...
