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Joakim Westerlund. Photo.

Joakim Westerlund

Professor, Programme director – Master of Data Analytics and Business Economics

Joakim Westerlund. Photo.

Price Discovery and Asset Pricing

Author

  • Joakim Westerlund
  • Susan Sharma
  • Paresh Narayan
  • Kannan Thuraisamy

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