Professor Christian Wagner Wins Wharton School-WRDS Award 2017
The paper ‘What is the Expected Return on a Stock?’ by Christian Wagner, Professor at the Department of Finance and FRIC center member, wins the Wharton School-WRDS Award for the Best Empirical Finance paper. The paper is co-authored with Ian Martin from London School of Economics and was presented at the Western Finance Association Meeting (WFA) in Whistler Canada on June 26, 2017.
In the paper, the authors derive a formula that expresses the expected return on a stock in terms of the risk-neutral variance of the market and the stock’s excess risk-neutral variance relative to the average stock. These components can be computed from index and stock option prices; the formula has no free parameters. The authors then test the theory in-sample by running panel regressions of stock returns onto risk-neutral variances. The results of the paper suggest that there is considerably more variation in expected returns, both over time and across stocks, than has previously been acknowledged.
In 2017, there were 1902 papers submitted to the WFA Meeting and 144 papers included in the program. Among the 144 papers, only 5 of the papers were selected for an award in different categories.
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