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Paul Tetlock – Columbia
1 March 2019 @ 3:00 pm - 4:30 pm
We decompose the returns of
five well-known anomalies into cash flow and discount rate news. Common patterns emerge across all factor portfolios and their mean-variance efficient combination. The main source of anomaly return variation is news about cash flows. Anomaly cash ow and discount rate components are strongly negatively correlated, and this negative correlation is driven by news about long-run cash flows. Interestingly, anomaly cash flow (discount rate) news is approximately uncorrelated with market cash flow (discount rate) news. These rich empirical patterns are
useful for guiding specifi cations of asset pricing models and evaluating myriad theories of anomalies.