Price Discovery and Asset Pricing
(2016) In Pacific Basin Finance Journal 40(A). p.224-235- Abstract
- This paper tests the hypothesis that price discovery influences asset pricing. Our innovations are twofold. First, we estimate time-varying price discovery for a large number (21) of Islamic stock portfolios. Second, we test using a predictive regression model whether or not price discovery predicts stock excess returns. We find from both in-sample and out-of-sample tests that all 21 portfolio excess returns are predictable. We show that a mean-variance investor by tracking price discovery is able to devise profitable trading strategies.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/892260a8-bd8d-4b84-ba1f-8088c8e1d25f
- author
- Westerlund, Joakim LU ; Sharma, Susan ; Narayan, Paresh and Thuraisamy, Kannan
- organization
- publishing date
- 2016
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Price discovery, Asset pricing, Islamic stocks, Predictive regression, Out-of-sample
- in
- Pacific Basin Finance Journal
- volume
- 40
- issue
- A
- pages
- 12 pages
- publisher
- Elsevier
- external identifiers
-
- wos:000389092200015
- scopus:85028281295
- ISSN
- 0927-538X
- DOI
- 10.1016/j.pacfin.2016.08.009
- language
- English
- LU publication?
- yes
- id
- 892260a8-bd8d-4b84-ba1f-8088c8e1d25f
- date added to LUP
- 2016-10-28 11:48:04
- date last changed
- 2022-02-21 21:22:55
@article{892260a8-bd8d-4b84-ba1f-8088c8e1d25f,
abstract = {{This paper tests the hypothesis that price discovery influences asset pricing. Our innovations are twofold. First, we estimate time-varying price discovery for a large number (21) of Islamic stock portfolios. Second, we test using a predictive regression model whether or not price discovery predicts stock excess returns. We find from both in-sample and out-of-sample tests that all 21 portfolio excess returns are predictable. We show that a mean-variance investor by tracking price discovery is able to devise profitable trading strategies.}},
author = {{Westerlund, Joakim and Sharma, Susan and Narayan, Paresh and Thuraisamy, Kannan}},
issn = {{0927-538X}},
keywords = {{Price discovery; Asset pricing; Islamic stocks; Predictive regression; Out-of-sample}},
language = {{eng}},
number = {{A}},
pages = {{224--235}},
publisher = {{Elsevier}},
series = {{Pacific Basin Finance Journal}},
title = {{Price Discovery and Asset Pricing}},
url = {{http://dx.doi.org/10.1016/j.pacfin.2016.08.009}},
doi = {{10.1016/j.pacfin.2016.08.009}},
volume = {{40}},
year = {{2016}},
}