Use this URL to cite or link to this record in EThOS: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.779013
Title: Essays on information and frictions in financial markets
Author: Han, Yueyang
ISNI:       0000 0004 7964 7156
Awarding Body: London School of Economics and Political Science (LSE)
Current Institution: London School of Economics and Political Science (University of London)
Date of Award: 2019
Availability of Full Text:
Access from EThOS:
Full text unavailable from EThOS. Please try the link below.
Access from Institution:
Abstract:
The first chapter studies the dynamics of information acquisition and uncertainty in a noisy rational expectations model. Investors choose to acquire most information at times when uncertainty and risk premia are high; this choice feeds back and endogenously reduces subsequent uncertainty. Within the model, uncertainty can be measured directly from risk-neutral variance-analogous to the VIX index-so this translates into the concrete prediction that risk-neutral variance mean-reverts rapidly following spikes in volatility, as is observed empirically. The cyclicality of information acquisition depends on the skewness of the underlying asset: if the market is negatively skewed, market-level information acquisition is countercyclical. Conversely, information acquisition and risk premia are high following good news for positively skewed assets such as individual stocks, which gives rise to momentum in the stock market. In the second chapter, my co-author and I consider an economy populated by investors with heterogeneous preferences and beliefs who receive non-pledgeable labor incomes. We study the effects of collateral constraints that require investors to maintain sufficient pledgeable capital to cover their liabilities. We show that these constraints inflate stock prices, give rise to clusters of stock return volatilities, and produce spikes and crashes in price-dividend ratios and volatilities. Furthermore, the mere possibility of a crisis significantly decreases interest rates and increases Sharpe ratios. The stock price has a large collateral premium over non-pledgeable incomes. Asset prices are in closed form, and investors survive in the long run. The third chapter studies information acquisition with a long-lived risky asset that generates dividends in each period. The investors can either be informed or uninformed, and the informed investors actively acquire information on the timevarying dividend growth rate. Informed investors take short positions in the variance swap to realize their informational advantage; the uninformed investor takes a long position to hedge his risks. Serial correlation of returns is decreasing in information acquisition of informed investors. Low uncertainty induces investors to acquire less information and decreases the cross-sectional dispersion of beliefs in expected returns.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.779013  DOI: Not available
Keywords: HC Economic History and Conditions ; HG Finance
Share: