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Asset Pricing Funding Liquidity Risk and the Cross-Section of Stock Returns 29 August, 2013 - Singapore
At a special presentation in Singapore on 29 August, 2013, René Garcia, Academic Director of the EDHEC-Risk Institute PhD in Finance and Dean of Graduate Studies and Professor of Finance at EDHEC Business School, will be presenting his recent empirical work on the relationship between the liquidity, volatility and returns of equity and funding scarcity and its implications for asset pricing.

Theory predicts that frictions in the funding markets of financial intermediaries should transmit to the cross-section of equities. Stocks that experience low returns when funding becomes scarce should exhibit higher illiquidity, higher volatility and ultimately higher risk premium.

In previous work, Professor Garcia developed a measure of funding liquidity (based on deviations from arbitrage in a panel of U.S. Treasury bond pairs with similar cash flows but different ages) which was shown to affect asset growth in the shadow banking sector and found to be a predictor of risk premia across a wide range of fixed income markets.

Professor Garcia’s new research empirically explores the role of funding liquidity on the illiquidity, volatility and returns of individual portfolios. It also looks at what happens to the cross-section dispersion of these portfolio characteristics when funding conditions deteriorate and whether this risk is priced and how it explains the returns across liquidity-, volatility-, and size-sorted portfolios. The study also investigates the interaction between the funding liquidity measure and broker-dealer leverage and whether they can be combined to give a better picture of the state of funding conditions. Finally, it looks at the link between momentum profits and liquidity risk.

Programme
  • 5:45pm
    Registration

  • 6:00pm
    Presentation: Funding Liquidity Risk and the Cross-Section of Stock Returns
    René Garcia, Dean of Graduate Studies and Professor of Finance, EDHEC Business School and Academic Director of the PhD in Finance programme, EDHEC-Risk Institute
    • Understanding the relationship between funding liquidity and asset pricing
    • Funding liquidity, market liquidity, volatility and flight to quality
    • Funding liquidity and Fama-French size and value portfolios
    • Funding liquidity and Carhart momentum portfolios

  • 7:30pm
    Question & Answer Session

  • 8.00pm
    Reception
About the Speaker

Professor Garcia’s research interests lie in the fields of asset pricing, portfolio and risk management and financial econometrics. Prior to joining EDHEC Business School, he was a professor at Université de Montréal and the scientific director of the interuniversity research centre CIRANO. He has published in leading journals including Econometrica, Journal of Econometrics, Journal of Finance, Management Science, and Review of Financial Studies. He is a co-founder of the Journal of Financial Econometrics. Professor Garcia has received numerous research grants, including a recent endowment by the AXA Research Fund. He holds a PhD in Economics from Princeton University.
Event Details
  When   Between 29/08/2013 05:30 PM and 29/08/2013 09:00 PM
Where   EDHEC Risk Institute–Asia, One George Street, Seventh Floor, Singapore
 
Contact Details
  Name   Syh Jiuan Ng
E-mail   syhjiuan.ng@edhec-risk.com
Phone   +65 6438 0030
 
Attachments
  Programme