The Feller diffusion, filter rules and abnormal stock returns

Title: The Feller diffusion, filter rules and abnormal stock returns
Creator: Docherty, Paul; Dong, Yizhe; Song, Xiaojing; Tippett, Mark
Relation: European Journal of Finance Vol. 24, Issue 5, p. 426-438
Publisher Link: http://dx.doi.org/10.1080/1351847X.2017.1309328
Publisher: Routledge
Resource Type: journal article
Date: 2018
Description: We determine the conditional expected logarithmic (i.e. continuously compounded) return on a stock whose price evolves in terms of the Feller diffusion and then use it to demonstrate how one must know the exact probability density that describes a stock’s return before one can determine the correct way to calculate the abnormal returns that accrue on the stock. We show in particular that misspecification of the stochastic process which generates a stock’s price will lead to systematic biases in the abnormal returns calculated on the stock. We examine the implications this has for the proper conduct of empirical work and for the evaluation of stock and portfolio performance.
Subject: Feller diffusion; Fokker–Planck equation; Geometric Brownian Motion; logarithmic return
Identifier: http://hdl.handle.net/1959.13/1399795
Identifier: uon:34684
Identifier: ISSN:1351-847X
Language: eng
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