"Let me guess. A five-man crew this time. As usual a bit light...
There's gonna be one speed: mine. If you can't keep up, don't step up."
The Chronicles of Riddick
"Let me guess. A five-man crew this time. As usual a bit light...
There's gonna be one speed: mine. If you can't keep up, don't step up."
The Chronicles of Riddick
"Maledetti" - "Mad for Finance"
Pavia' Finance unofficial page
powered but not hedged
by Finance University of Pavia
In questa pagina trovate le Tesi fatte per la laurea magistrale dagli studenti MEFI.
Volevo ringraziare tutti loro per la fiducia dimostrata, pubblicando i loro lavori.
E' un piccolo riconoscimento per il loro impegno: infatti chiunque inizia sa che non sarà mai banale, che dovranno "spingere" molto e superare difficolta'.
Di seguito trovate i nomi e poi sotto il titolo e l'abstract del loro lavoro
Grazie ancora - DM^2
In ordine casuale (...metto solo all'inizio i primi due sciagurati che hanno avuto il coraggio di iniziare la serie)
Alberto Dondoni, Carlo Alberto Grecchi, Andrea Roveda, Angelo Venditti, Benedetta Sorge, Caterina Cavaliere, Emanuele Ferrari, Emanuele Gabini, Eugenio Achilli, Federica Naldi, Flavia Placidi, Giulia Lopez, Lucrezia Lomonaco, Giulia Raspanti, Tommaso Pasetti, Antonella Salomone, Antonio Amendola, Federico De Marco, Filippo Cova, Mauro Cristiani, Riccardo Barbaglio, Stefano Muratorio, Lorenzo Rizzo, Pierluigi Pierni, Sonia Tomaso, Omar Paolillo, Buzzo Matteo, Valentina Maini, Baldassarre Murania, Riccardo Silvani.
Aprile 2022
Luca Bianchi
Andrea Trevisan
POTETE TROVARE LA TESI E LA RELATIVA PRESENTAZIONE
ANDANDO SUL NOME IL LINK ESTERNO EVENTUALE con le informazioni
ovviamente ...work in progress
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Equity Duration: a comprehensive theoretical and practical analysis
Abstract
The equity duration is an important parameter used by investors to choose between different investment opportunities in financial economics. While the concept of duration is usually associated with fixed incomes assets, its expansion to the equity assets is becoming more relevant in the recent period, with the increase of riskfree rates and the consequent rising discount factors. The thesis aims to calculate and compare different types of equity duration, investigate the changes in prices and equity values, and identify whether it exists a relationship between duration fluctuations and enterprise values in equity indexes. The dataset covers roughly 30 years of data up to the end of 2021. Provided by Bloomberg analysts, it includes weekly last prices, best long-term growth for the earning per share, best calculated free cash flows, and 10-year and 30-year US risk-free rates. Goldman Sachs provided the equity risk premium. The analysed equity indexes belong to the US market, four of them refers to the general us market while the others to the first-level and secondlevel sectors, with the price of S&P500 used as the benchmark for beta computation in the CAPM discount factor formula. The analysis uses several methods to calculate the duration between 21/12/2007 and 01/10/2021, each one aiming to find the most accurate and consistent. The first method is the benchmark for the subsequent computations and uses the dividend discount model; the second method uses the discounted cash flows model over four years; and the last one implements an HModel to the discounted cash flows over nine years. The last chapters analyse the relationship between debt and duration fluctuations and present a new method to compute the duration in continuous time. The results suggest that each subsequent model starting from the simpler improves the duration calculus, by distinguishing between high-duration and low-duration indexes and sectors. Furthermore, data show a relation between debt and duration fluctuations, which could help investors’ decisions in asset allocation.
The Gamestop Case: similarities and differences with past economic bubbles
Abstract
In the course of the working week going from the 25th to the 29th of January 2021, the price of GameStop (GME) shares reached the all-time high closing price of $347,51 and it even hit $480 during the intraday negotiations. These aren’t particularly impressive numbers on their own, but they become so if we consider that the first trading day of the year recorded a market valuation of $17,25, which was already a sharp increase compared to the price of $4,34 six months earlier. The objectives of this thesis are to explain why the stocks of the video game retailer went through such a price surge, with the help of the speculative bubble theory, and to contextualize why we are quite confident that the whole GameStop saga is still far from its true end. We firstly analyze the academic literature about economic bubbles and the mechanisms behind the operation of short selling, to then proceed with a summary of the most relevant historical bubbles both from the points of view of the impact on the economy and the novelties brought. The core of the thesis is dedicated to the GameStop case, starting with the narration of the episode in detail and successively trying to quantify the size of the overestimation and the contribution of short squeeze and gamma squeeze mechanisms. We conclude our study with some personal considerations regarding the various issues that have been raised throughout the entire analysis, hoping to have been able to provide a simple but effective point of view on the whole event. We find concrete evidence about the fact that the GameStop share price is still in a bubble state, a condition which has characterized it since the incredible market rally of late January 2021. We are also able to identify some peculiar features which clearly distinguish this one from the other asset bubbles of the past. Finally, we delineate some possible future scenarios and we try to hypothesize some practices and regulatory changes which could somehow limit the frequency and the intensity of similar phenomena in the years to come, since a more common occurrence of them could contribute to the deterioration of the overall stability of the financial markets.
Antonio Amendola,
A Complete Analysis of Low β Factor in Portfolio Contruction Empirical Results and New Explanation
Abstract
This work aims to insight the β factor and the related components, in order to build a profitable strategy and, more important, for provide empirical evidences about the beta anomaly. The thesis analyze the beta anomaly, following the fundamental steps from the born to the evolution. From the empirical evidences of this anomaly, we starts for provide a new investment approach and, consequently, we provide an explanation about the nature of the low beta strategies. The anomaly, born ten year after the modern finance, is the low beta stock over-performance with respect to the high beta stocks. The historical analysis performed by several researchers, demonstrates that the CAPM is fallacious, noting a bias about the risk/reward relationship. As a consequence, in 1972, Eugene Fama refers about the "Death of the Capital Asset Pricing Model".
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Alberto Dondoni,
VIX INDEX AND VOLATILITY: STATISTICAL ANALYSIS AND PORTFOLIO STRATEGIES
Abstract
In this dissertation we perform a statistical analysis on the VIX Index and develop a series of portfolio strategies on implied volatility by investing in VIX
Futures. We will consider three asset classes: the typical equity and bonds, represented by the S&P500 index and the US Treasuries 2 and 10 years. The analysis will focus on the relationship between these three classes, with the aid of the correlation and cross-correlation functions. Then we will focus our attention on the VIX Futures, with an analysis of the VIX Futures curve and its relationship with the VIX Index, stocks and bonds. The last part will be dedicated to the presentation of different portfolio strategies involving short and long positions on VIX Futures, with an interesting result: a simple yet very profitable strategy on VIX Futures.
Key: Volatility, Portfolio, Derivatives
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Carlo Alberto Grecchi,
Low Beta Portfolio, a deep dive analysis and new strategies
(original title, Analisi dei portafogli a basso beta e costruzione di strategie relative)
Abstract
L’obiettivo della tesi ́e quello di costruire una strategia contemporaneamente long-short e Beta neutral. Il lavoro analizza l’anomalia del Beta, ripercorrendo i passaggi fondamentali che hanno caratterizzato la nascita e l’evoluzione di tale parametro.
Dalle evidenze empiriche che hanno messo in luce questa anomalia abbiamo preso punto per sviluppare la nostra strategia di investimento. L’anomalia, che ́e iniziata ad essere riscontrata gia un decennio dopo la nascita della Moderna Teoria della Finanza, risiede nella overperformance delle azioni a basso Beta rispetto a quella ad alto. Le molte analisi storiche fornite da diversi ricercatori hanno confutato la teoria
fornita dalla nascita del CAPM, rivelando un bias di fondo nella relazione rischio-rendimento che soggiace a tale modello. Queste evidenze hanno portato Eugene Fama, nel 1972, a decretare la “morte” del Beta quale unico fattore di rischio.
Con questo scritto si vuole mettere in luce le prove che sottolineano questa anomalia e in che modo i ricercatori hanno provato a fornire delle spiegazioni.
Key: Portfolio, Low Beta, Strategy
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Valuation measures: from simple ratios to stock market’s predictors
Abstract
The title represents the union of two main studies: the first one focused on the analysis of valuation measures, specifically of the CAPE Ratio, a particular form of the Price Earning Ratio introduced by the Nobel Prize and Professor of Economics at the University of Yale Robert Shiller, and the second one focused on the forecast of the future behavior of the US stock market. The results have been then incorporated into a single practical application, aimed at creating multiple portfolio strategies. CAPE Ratio means Cyclically Adjusted Price Earnings Ratio and is considered an adjustment of the P/E since it is always a ratio between the price of a stock (or index) and the level of earnings per share, but price and earnings are adjusted for inflation and, at the denominator, instead of having the trailing earnings per share for the past 12 months, it is considered the average EPS of the last 10 years adjusted for inflation; formulating the Price Earning Ratio in this form, we have a less volatile metric, and not only adjusted for inflation but, more in general, adjusted for the evolution of the economic cycle.
This multiple has been very successful among both academics and professionals because, with its trend, it has been able to signal in advance which were the undervalued markets (sectors or single stocks) and which the overvalued ones, allowing investors to generate profits in the first case and reduce losses in the second one. In addition, it has been analyzed that between the level of the CAPE Ratio and the annualized return of future 10 years of the main US stock market index, the S&P500, there exist a significant relationship, so, the current level of the CAPE Ratio can be used to estimate the annualized rate of return that the US stocks market will produce in 10 years from now.
The second analysis is related to the predictability of the stock market. From past studies we know that Campbell (1998), Asness (2000) and Shiller
(2002), among others have demonstrated that the Dividend Yield D/P and the market Earning Yield E/P (or the inverse of the CAPE Ratio) have both
power in forecasting expected future return from equities, and that this power increases as the term horizon increases. Among all these studies I decided to analyze, replicate and extend the model developed by Clifford Asness and explained in the paper "Stocks versus Bonds: Explaining the Equity Risk Premium" (2000). Asness explains how the Dividend Yield and Earnings Yield of the S&P500 generally outperformed long-term US government yields, usually with a considerable margin, but that situation has changed since the middle of the 20th century. In theorizing this phenomenon, Asness has developed a model according to which the difference between stock and bond expected return, ie the equity risk premium, is related to the difference between the long-run volatilities of the two asset classes. Moreover, he then tested the market predictability of the S&P500 using the Dividend Yield.
After having replicated his model, I tried to extend it in different ways: by implementing it also in the more recent period, by separating the analysis in
different historical periods, by checking some assumptions of the model from an econometric point of view and, lastly, by use as independent variable not only the Dividend Yield, but the CAPE Ratio as well.
From the union of these two studies, it was possible to make an extensive analysis of the returns offered by the two markets, the US stocks and bonds
ones, and then use the results obtained to elaborate two portfolio strategies, discussed in Chapter 4. With the first strategy I built a long-short 100% equity portfolio consisting of the S&P indices of the GICS sectors. The strategy has been defined as follows: starting from a dataset of prices, earnings per share and inflation for each sector, I calculated the CAPE Ratio of all GICS sectors (with the exception of the Real Estate due to scarcity of data for the backtest). For each of them I then created a mechanism that defined the positioning on the sector index, BUY or SELL depending on the level recorded by the sector’s CAPE Ratio. By combining all sectors within a single portfolio, with the same weighting, I was able to define an investment methodology that turned out to be able to outperform the S&P500 reference index. The second portfolio, on the other hand, was defined as a portfolio that invested both in stocks and bonds in a dynamic manner, whose investment percentages were defined by two multiples, the CAPE Ratio and the BEER Yield, the Bond Equity Earnings Yield Ratio.
Key: Valuation, Asset Allocation, Strategy
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Flavia Placidi,
Underpricing and aftermarket performance of IPOs in the Eurozone
Abstract
This work is an empirical study of Initial Public Offerings (IPOs) behavior and anomalies. After a comprehensive review of the related literature, this thesis investigates IPOs underpricing and long-run performance in Austria, Belgium, Finland, France, Germany, Greece, Italy, Ireland, Netherlands, Spain and Portugal. Our research sample is composed of 274 firms offering at least 200 Mln of Euros in their IPO, within January 1999 and November 2014. With the aim of enriching existing cross-sectional empirical evidence, we will examine our sample from both quantitative and qualitative prospectives. Our main purpose is to comprehend (at once) whether the extant anomalies are confirmed or denied and to check if relevant differences are detectable among countries and sectors.
Key: Valuation, Ipo, Strategy
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Caterina Cavaliere,
Trading volatility: an empirical approach
Abstract
This dissertation is dedicated to an empirical study of volatility trading through the use of option contracts. Starting from a complete analysis of the option market, we will then introduce volatility both as a measure and as an asset class. We will focus on the purest way of selling volatility, the short straddle strategy, and underline the reasons why an investor should be willing to undertake a similar risk. In order to develop our trading idea, we will investigate the relationship between the dividend yield and the implied volatility across several market indexes, accepting the theory
of indifference after the implementation of different models. In the final part we will introduce our simulation model utilized for pricing the options and implement our strategies. The first will be an enhancement of a base short straddle strategy, based on a trading indicator built on a theoretical straddle priced without dividend yield; finally we will suggest a different view of this theoretical straddle as a proxy of the Equity Risk Premium, deriving a trading indicator for a long short strategy on the stock.
Key: Volatility, Asset Allocation
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Tommaso Pasetti,
The Low-Risk Effect, from Betting Against Beta to Betting Against Correlation
Abstract
The aim of the thesis is to analyse the so called Low Risk Effect and the evolution of the risk-reward relationship in time. We will start from the “father” of Modern Portfolio Theory, Henry Markowitz, to conclude with the last empirical study provided by Asness, Frazzini and Pedersen in 2017: Betting Against Correlation. Focusing on correlation and on the BAC factor we will try to implement a profitable strategy over the time interval 2005-2013; we will evidence the aspect of negative correlated stocks and to conclude we will go further analysing its sector composition a creating a “correlation map” that is able to show the evolution of stocks correlation, both against the market and the sector, in time.
Key: Portfolio, Low Beta, Strategy
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Federica Naldi,
Enhancement and insurance portfolio: optimization through options
Abstract
A variety of empirical studies have proved covered call writing and managed volatility to be very well performing systematic investment strategies. They have also been proved to performe their best when combined, creating a powerful equity portfolio enhancement tool.
Our intention is to further develop this argument through options use and specifically synthetically replicating the covered call writing via a short position in a put option as well as building up a managed volatility strategy resulting from the combination of the short put option with a long put option on the same underlying asset.
The final aim of our study is combining options in order to create an overall strategy offering both an enhancement tool and an insurance tool, intended to improve the performance of a certain portfolio, with reference to equity securities. Fundamental to the effectiveness of providing the enhancement and at the same time limiting risk, is the configuration of the put options used and we adopt the rationale that this configuration should be modeled according to market condition. Considering one-month options in order to allow frequently rebalancing of our strategy based on observable market conditions, we will investigate several optimization models to finally focus on the model that revealed to be the best performing.
Through the study of the optimization target we further explore the relationship between the optimal strike prices to select in order to reach a certain investment objective, and the expectation on volatility for the underlying asset. After testing various optimization models based on slightly different aspects of this relationship, the final model is obtained working on the specific connection between the at-the-money volatility and the convexity of the volatility skew. Finally an optimization algorithm is modeled through a second degree polynomial fitting the volatility skew, in order to select the best performing strategy configuration according to actual market conditions.
Key: Portfolio, Volatility, Strategy
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Angelo Venditti,
The car of the future: Tesla Inc. and the next big disruption. A qualitative and quantitative assessment.
Abstract
Tesla, the all-electric car manufacturer that is revolutionizing the automotive industry, in the last year, has raised a series of important questions among a vast public worldwide, especially in the financial world: is the company really worth what the market makes it to be? Why, despite the persistent cash burning and losses that the company is experiencing, the financial world assigns it to a high value? In this work
such questions have been addressed, trying to see Tesla through a different lens: in fact, our opinion is that what is going on in the market, and, in particular, with Tesla, is a result of a process that, if analysed in depth, could shed some light to the valuation dilemma of the company object of this study. The starting point has been a focus on the "disruptive innovation" theory and the assessment of Tesla as a "disruptor", a key
point for the subsequent assumption in the valuation framework. Then, an in depth analysis of the automotive industry has been conducted, and this represents the central point in the positioning of Tesla in the market. What is the current diffusion of electric vehicles in the world? Which are the main technologies that drive this revolution?
How does the competition in this new market look like? The answers on these, and more other questions, are vital for a full and comprehensive analysis of Tesla. Finally, passing through a brief judgement of the latest results achieved by the company, that are useful for the valuation purpose, a series of model have been constructed in order to value the car manufacturer, starting from a modified version of the Discounted
Cash Flow model, that has been run departing from different assumptions that usually represent the basis of such models. Passing through a multiple analysis, of which the main limits have been evidenced, the work finishes with a value estimation based on the Real Option Valuation method: this choice has been driven by the strong belief that most of the value of Tesla lies in its implied potential, that is, inthe future that the company promises to create. This hypothesis, that also lies behind the discounted cash flow model, is critical in the valuation of Tesla, and represents the answer to the critical question addressed in this work.
Key: Valuation
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Stefano Muratorio,
Analysis and Simulations for Efficient Four Moment Portfolios
Abstract
From external auditors, portfolio managemen t is always seen as a big question mark, in particular the Modern Portfol io Theory with the development of the mathematical and statistical tools has become a sort of niche market for few people who needs to construct themselv es a step by step knowledge of the development of the economical choice, statistical, algebraic, optimization and econometric theories.
Key: Portfolio, Strategy
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Lorenzo Rizzo,
Momentum Investing Strategy: Evidence on European & American Stock Markets
Abstract
Over the last years, Momentum has become an important factor for selecting stocks to hold in the portfolio. Albeit a wide number of investors and funds are adopting such strategy in order to gain excess return against the market, the existing literature has not yet provided any sort of evidence or certainty concerning its sources. First of all, I will start by analyzing several equity markets in order to find the presence of momentum. I will create a real momentum portfolio strategy, by focusing on the portfolio rebalancing, the transaction costs and the volatility factor.
Then, I will conduct a study on the presence of momentum within the sectors with the purpose of finding the ones more vulnerable to such phenomenon. Last analysis will concern the features of momentum portfolio returns and the convenience of adopting such strategy: for the latter point, I will implement a statistical model in order to generate the alpha momentum. At the end, we will see that several results have been achieved.
In this Thesis, I found the presence of momentum phenomenon, both on American and European markets, almost only in relation to winners portfolio: regarding the losers they have exhibited a contrarian trend. The rebalancing and the transaction costs are both adverse factor for a momentum strategy: the former breaks the continuation in returns while the second can erode the capital gain by 1% up to 3% per year. I also stated that combining momentum and contrarian by high volatility offer the best performances. In the sector analysis I have found that only the American sectors are characterized by momentum, while the European ones present a mismatch between the most picked and the subsequent success rates.
Finally, I have found that a momentum strategy on American market would have achieved positive significant alphas in all stocks basket adopted; contrarily, the European momentum would have generated positive significant alphas in a unique stocks basket.
Key: Portfolio, Strategy
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Andrea Roveda
VIX Index and the relationship between implied volatility, market capitalization and stocks’ returns:
the case of Italian Market
Abstract
In this dissertation we study the Chicago Board Options Exchange Volatility Index (CBOE-VIX), analyzing its features and the most relevant VIX-related products that have been created in the last decade. This thesis is organized into four chapters. Volatility and options will be at the center of our first chapter. Next, we will perform an analysis of the main large- cap U.S. equity market, the Standard & Poor’s 500 and we will consider its relation with
the VIX. We will also introduce the relation between VIX and Size (market capitalization) of companies found by two american authors: Maggie and Thomas Copeland. In the third chapter we will investigate, using regression models, the same relation but considering the Italian market, particularly the FSTE MIB and the relative volatility index (IVMIB). The final part of this thesis will focus on the results obtained.
Key: Portfolio, Volatility, Strategy
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Emanuele Ferrari
VALUE CREATION: AN ANALYSIS WITH THE HOLT METHOD
Key: Portfolio, Valuation
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Emanuele Gabini
Risk Budgeting Approach: the Case of Italian Market
Key: Portfolio, Strategy
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Giula Raspanti
Equity Risk Premium drivers and estimation methods: The Grinold-Kroner Model.
Key: Portfolio, Strategy
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Antonella Salomone
INITIAL PUBLIC OFFERING IN THE LODGING INDUSTRY: PRICING THROUGH QUANTITATIVE LENS
Key: Portfolio, Valuation, Strategy
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Federico De Marco
Analysis For Portfolio Constuction in Pair Trading Cointegration Framework
Key: Portfolio, Strategy
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Riccardo Barbaglio
Life Insurance industry Analysis in new interest rates framework
Key: Valuation, Strategy
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Pieluigi Pierni
Founding family ownership and firm performance: some evidences from the Italian stock market
Key: Portfolio, Valuation, Strategy
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Mauro Cristiani
Forward-Looking Beta: Theoretical Analysis and Empirical Results
Key: Volatility, Strategy
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Filippo Cova
Black Litterman Portfolio: an application
Key: Portfolio, Strategy
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Lucrezia LoMonaco
From the VIX Index to VIX Futures: analysis and investment strategies
Key: Volatility, Portfolio, Strategy
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Giulia Lopez
Convertibles Bond Portfolio, an empirical analysis
Key: Portfolio, Strategy, Asset Allocation
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Eugenio Achilli