Three Essays in Empirical Asset Pricing

The financial crisis of 2007-2008 led to extraordinary government intervention in firms and markets. The scope and depth of government action rivaled that of the Great Depression. Many traded markets experienced dramatic declines in liquidity leading to the existence of conditions normally assumed to be promptly removed via the actions of profit seeking arbitrageurs. These extreme events motivate the three essays in this work. The first essay seeks and fails to find evidence of investor behavior consistent with the broad 'Too Big To Fail' policies enacted during the crisis by government agents. Only in limited circumstances, where government guarantees such as deposit insurance or U.S. Treasury lending lines already existed, did investors impart a premium to the debt security prices of firms under stress. The second essay introduces the Inflation Indexed Swap Basis (IIS Basis) in examining the large differences between cash and derivative markets based upon future U.S. inflation as measured by the Consumer Price Index (CPI). It reports the consistent positive value of this measure as well as the very large positive values it reached in the fourth quarter of 2008 after Lehman Brothers went bankrupt. It concludes that the IIS Basis continues to exist due to limitations in market liquidity and hedging alternatives. The third essay explores the methodology of performing debt based event studies utilizing credit default swaps (CDS). It provides practical implementation advice to researchers to address limited source data and/or small target firm sample size.

Live and Feeder Cattle Options Markets: Returns, Risk, and Volatility Forecasting

unpublished

Recomendr-entity recommendation based on ad-hoc dimensions

The growing availability and popularity of opinion rich resources on the online web resources, such as review sites and personal blogs, has made it convenient to find out about the opinions and experiences of layman people. But, simultaneously, this huge eruption of data has made it difficult to reach to a conclusion. In this thesis, I develop a novel recommendation system, Recomendr that can help users digest all the reviews about an entity and compare candidate entities based on ad-hoc dimensions specified by keywords. It expects keyword specified ad-hoc dimensions/features as input from the user and based on those features; it compares the selected range of entities using reviews provided on the related User Generated Contents (UGC) e.g. online reviews. It then rates the textual stream of data using a scoring function and returns the decision based on an aggregate opinion to the user. Evaluation of Recomendr using a data set in the laptop domain shows that it can effectively recommend the best laptop as per user-specified dimensions such as price. Recomendr is a general system that can potentially work for any entities on which online reviews or opinionated text is available.