Testing asset pricing models under non-linear assumptions: evidence from UK firm level panel data

[摘要] The thesis offers the first attempt to test the non-linear relation, i.e. the inverted-U curve hypothesis among firm size and stock return, with respect to firms listed on London Stock Exchange, by employing panel data from 1991 to 2011. The study contains relevant asset pricing literature review, theoretical and empirical linear and non-linear model specifications, data collection and cleaning, model estimation and testing, and interpretation and analysis of the empirical results. The literature review critically reviews the theoretical and empirical asset pricing models and some important considerations in testing and estimating asset pricing models. The empirical paper overall investigates whether the effect of firm size on stock return is approximated by an inverted-U curve shape relation, rather than linear: at low levels of firm size the effect is positive and at high levels of firm size the effect is negative. The thesis proposes that the inverse monotonic relation among firm size and stock return may not be the case instead it makes the first attempt at investing an inverted-U curve relationship, such that the presence of firm size leads to lower stock returns only after the levels of firm size become large enough.

[发布机构] University:University of Birmingham;Department:Birmingham Business School, Department of Accounting and Finance

[关键词] H Social Sciences;HG Finance