Three essays on empirical asset pricing

• Main Author: BIAN, Xueying
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2021
• Subjects: Asset Pricing; Behavioral Finance; Inter-firm Link; Employee Satisfaction; TMT Facial Similarity; CEO's Tweets; Finance
• Online Access: https://ink.library.smu.edu.sg/etd_coll/319; https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1319&context=etd_coll
• Institution: Singapore Management University

The dissertation consists of three essays on empirical asset pricing. The first chapter proposes a novel inter-firm link - similar employee satisfaction. Based on the employee satisfaction data on Glassdoor, the returns of similar employee satisfaction (SES) firms are documented to predict focal firm stock returns. A long-short portfolio sorted on the lagged returns of SES firms yields the Fama-French six-factor alpha of 135 bps per month. The observed predictability cannot be explained by risk-based arguments or subsumed by other known inter-firm momentums. According to the international tests, we observe stronger return predictability in countries with more flexible labor markets. The return predictability across SES firms may reflect a new type of cross-firm link derived from the knowledge spillover about employee welfare policies via social transmissions. The second chapter discovers a novel firm characteristic that contains information about firm stock performance. Inspired by the psychological findings that demographic similarity can promote trust and coordination within a team, we propose and find that firm performance is positively related to the facial resemblance between top management team (TMT) members due to the higher managerial efficiency. A long-short value-weighted portfolio sorted on the TMT facial similarity yields a significant Fama and French (2018) six-factor alpha of 40 bps per month. In addition, the firm TMT facial similarity is also documented to be informative in firm operating performance. In addition, our tests suggest that investors’ limited attention and limits of arbitrage are the potential mechanisms behind the documented return predictability. The last chapter studies the effects of CEO tweeting on firm stock performance by creating a measure of CEO tweeting skill. Based on the U.S. public firms sample from 2012 to 2018, we discover that if CEOs are good at communicating on social media, firms can benefit from CEOs’ high exposure on Twitter. However, if CEOs cannot handle well on social media, tweeting frequently can be harmful to the firm stock performance. We find the results hold across different countries (such as France, Germany, and the United Kingdom). The possible mechanisms behind our documented findings are shown to be limited attention and limits to arbitrage. And our documented effects are more likely to be explained by the behavioral bias other than risk explanations.