New title and content for elephants

posted Jul 14, 2020, 6:01 AM by Julian Thimme   [ updated Jul 14, 2020, 6:03 AM ]

We updated our paper on the impact of the weighting matrix in cross-sectional asset pricing tests with GMM, formerly entitled "Elephants and the cross-section of expected returns". The new title is "GMM weighting matrices in cross-sectional asset pricing tests". The new version provides a more thorough analysis of the described issue with GMM estimations of misspecified models. The key take-away from our paper is that factor models, even those with strong factors, can appear to have a very good pricing performance, although the factors are actually unpriced, i.e., the factor exposures are uncorrelated with average returns in the cross-section. The new version can be found here.

"Up- and Downside Variance Risk Premia in Global Equity Markets" accepted for publication

posted Jun 3, 2020, 5:57 AM by Julian Thimme

My paper Up- and Downside Variance Risk Premia in Global Equity Markets, joint work with Matthias Held, Julia Kapraun, and Marcel Omachel, was accepted for publication in the Journal of Banking and Finance. Moreover, the working paper Fuel is Pumping Premiums, joint with Robert Dittmar and Christian Schlag, has a new title. The new title is Non-substitutable Consumption Growth Risk. There will be new versions of this paper and the Elephants paper soon.

"Implied Volatility Duration" accepted for publication in the JFE

posted Jan 30, 2020, 3:24 AM by Julian Thimme   [ updated Jan 30, 2020, 3:25 AM ]

My paper "Implied Volatility Duration: A Measure for the Timing of Uncertainty Resolution", coauthored by Christian Schlag and Rüdiger Weber, is accepted for publication in the Journal of Financial Economics.

Open PhD position

posted Nov 26, 2019, 5:49 AM by Julian Thimme   [ updated Nov 26, 2019, 5:50 AM ]

I am looking for a gifted student who wants to do independent research under my supervision. The job advertisement (in German) can be found here.
Please contact me directly if you have any questions about the position or the job profile.

New research paper on the value premium online

posted Nov 22, 2018, 8:21 AM by Julian Thimme

My new working paper "Fuel is Pumping Premiums: A Consumption-based Explanation of the Value Anomaly", coauthored by Robert Dittmar and Christian Schlag, can be downloaded here. In this paper, we question the standard approach in empirical consumption-based asset pricing to use nondurables and services as a proxy for consumption. We estimate substitution elasticities between different consumption bundles and show that households cannot substitute gasoline consumption by consumption of other nondurable goods or services. As a consequence, gasoline consumption shows up as a separate factor in the pricing kernel. Cross-sectional variation in gasoline consumption betas explains a large part of the value premium. Using a textual analysis of individual firms' 10-K reports, we find that the energy-intensity of firms' businesses are strongly positively related to their book-to-market ratios of equity. As a consequence, value stocks are riskier than growth stock because they suffer from the same energy supply shocks that also affect households.

New version of Elephants paper online

posted Nov 22, 2018, 8:12 AM by Julian Thimme   [ updated Nov 22, 2018, 8:14 AM ]

In the new version of my paper "Elephants and the Cross-Section of Expected Returns" with Nora Laurinaityte, Christoph Meinerding, and Christian Schlag, we show that there is a flaw in the design of GMM cross-sectional tests. As a result, factors with little explanatory power can seem highly significant and the explanatory power can be spuriously high. We show that this effect is present for weak and for strong factors and that irrelevant factors (betas to these are not related to expected returns in the cross-section) have the potential to drive out relevant ones. We suggest that authors should always report and discuss their estimates of the factor means which happen to be far away from the sample averages in case of a spuriously high pricing performance.
The new version of the paper can be downloaded here.

"Vol-of-vol" accepted for publication in the JFQA

posted Aug 10, 2018, 9:01 AM by Julian Thimme   [ updated Aug 10, 2018, 9:02 AM ]

My paper Volatility-of-Volatility Risk, coauthored by Darien Huang, Christian Schlag, and Ivan Shaliastovich, is accepted for publication in the Journal of Financial and Quantitative Analysis.

New versions of "Up- and Down"- and "Predictability"-papers online

posted Jul 23, 2018, 1:53 AM by Julian Thimme   [ updated Jul 23, 2018, 1:54 AM ]

We revised our paper "Up- and Downside Variance Risk Premia in Global Equity Markets". It can be downloaded here.
We also revised our paper "Predictability and the Cross-Section of Expected Returns: A Challenge for Asset Pricing Models". It can be found here.

Teaching award for AEAP

posted Mar 30, 2018, 3:04 PM by Julian Thimme   [ updated Mar 30, 2018, 3:10 PM ]

My course on "Advanced Empirical Asset Pricing" in the winter term 2017/2018 won the teaching award for the best course in the Master's programme of the Faculty of Economics and Business Administration. I would like to thank my students for the positive feedback and the great semester. I really enjoyed it.

New version of Elephant paper online

posted Jan 29, 2018, 1:56 PM by Julian Thimme

The brand new version of our elephant paper is now online and can be downloaded here.

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