Joakim Westerlund
Professor, Programme director – Master of Data Analytics and Business Economics
Price Discovery and Asset Pricing
Author
Summary, in English
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.
Department/s
- Department of Economics
Publishing year
2016
Language
English
Pages
224-235
Publication/Series
Pacific Basin Finance Journal
Volume
40
Issue
A
Document type
Journal article
Publisher
Elsevier
Topic
- Business Administration
Keywords
- Price discovery
- Asset pricing
- Islamic stocks
- Predictive regression
- Out-of-sample
Status
Published
ISBN/ISSN/Other
- ISSN: 0927-538X