Ronald L. Moy

A multivariate test of the covariance-co-skewness restriction for the three moment CAPM

Abstract This paper re-examines the importance of co-skewness in asset pricing using the multivariate testing procedure proposed by Gibbons (1982). This new approach allows for the testing of a share restriction derived from the Kraus and Litzenberger (1976) model which has been ignored in previous empirical studies. The results indicate that co-skewness is statistically significant in pricing risky assets and that the covariance risk is much more important in explaining the risk-return relationship than the co-skewness risk. However, the results also indicate that the Kraus and Litzenberger model does not adequately describe expected returns.

Bulls, bears, and value line's rankings

Abstract This paper studies the bull and bear market performance of portfolios formed on the basis of Value Lines rankings. We examine the effect of different market conditions on the excess return and systematic risk of portfolios formed on the basis of Value Lines rankings. Our results indicate that although securities that receive Value Lines top ranking for timeliness perform best during bull markets, they exhibited exceptionally poor performance during bear market conditions. These conclusions may lead investors to rethink how they should use Value Lines recommendations in forming their own investment portfolios.

Portfolio Performance: Illustrations From Morningstar

Abstract Measures of portfolio performance, such as the Sharpe ratio and Jensens alpha, are commonly taught in investment and portfolio management courses that use hypothetical examples. Using the Morningstar Web site, the author of this article performed a comparison of these two measures. The author sought to provide instructors with the opportunity to illustrate the differences between these measures and to show some of the caveats that must be considered in the application of these tests to real-world data.

Using The Wall Street Journal in Economics and Finance Courses: A Survey and Suggestions

Abstract This article offers some suggestions on incorporating The Wall Street Journal into economics and finance courses. This approach differs form suggestions made by the Journal because students are asked to focus on specific sections of it rather than use the paper to play various games. A series of annotated outlines to guide students in their use of the Journal, as well as results from a survey of students who used these outlines in two courses, are presented. A substantial percentage of students indicated that they found the outlines beneficial, enjoyed using the Journal, and would be likely to continue reading it once the course ended.

Normal and Lognormal Distributions

This chapter deals with the most important probability distribution in statistics, the normal distribution, which is useful for conducting many kinds of analyses. The probability density function of a normal distribution, a bell-shaped curve, is completely described by two parameters, the mean m and the variance s 2 . Let Z be a standard normal random variable with mean zero and variance one, the probability that Z is less than a constant a is the area to the left of a under the bell-shaped curve. This area can be found from a standard normal distribution table.

Study guide for statistics for business and financial economics

Data collection and presentation frequency distribution and data analyses numerical summary measures probability concepts and their analysis discrete random variables and probability distributions the normal and lognormal distributions sampling and sampling distributions other continuous distributions and moments for distributions estimation and statistical quality control hypothesis testing analysis of variance and Chi-square tests simple linear regression and the correlation coefficient simple linear regression and correlation - analyses and applications multiple linear regression other topics in applied regression analysis nonparametric statistics time-series - analysis, model and forecasting index numbers and stock market indexes sampling surveys - methods and applications statistical decision theory - methods and applications.

Multivariate tests of the capm under heteroskedasticity: A note

Abstract This note extends the multivariate testing procedure to the case where heteroskedasticity is present. Previous tests of the CAPM relied on the market model. However, a substantial body of literature indicates that the error term in the market model is heteroskedastic. Failing to correct for heteroskedasticity can lead to biased estimates of the variance-covariance matrix and hence, incorrect statistics for hypothesis testing. In this note, a Wald test with a variance-covariance matrix corrected for heteroskedasticity is derived to test the CAPM. Using monthly data from 1926 to 1994, the adjusted test overwhelmingly rejects the zerobeta version of the CAPM for the 14 subperiods and for the entire sample period.

Business and Research Proposals in Economics and Finance Courses

Abstract This article describes a strategy for using business or research proposals as an alternative to traditional term papers and term projects. By eliminating the tedious tasks of data collection and manipulation, this strategy frees students to engage in creative and innovative thinking, while allowing them to acquire many of the same skills used in traditional assignments. Use of business and research proposals by the author in both undergraduate and MBA-level courses in money and capital markets generated creative and innovative ideas and well-thought-out proposals from students.