Demand factor

Abstract: The low (high) abnormal returns of stocks with high (low) beta, which we refer to as the beta anomaly, is one of the most persistent anomalies in empirical asset pricing research. This article demonstrates that investors’ demand for lottery-like stocks is an important driver of the beta anomaly. The beta anomaly is no longer detected when beta-sorted portfolios are neutralized to lottery demand, regression specifications control for lottery demand, or factor models include a lottery demand factor. The beta anomaly is concentrated in stocks with low levels of institutional ownership and it exists only when the price impact of lottery demand is concentrated in high-beta stocks.

Abstract: Structural factors are important when it comes to explaining tourism growth. In this connection, crucial roles are played by structural change in demand and differentials between productivity in tourism and in manufacturing. The demand factor stimulates the rise of tourism demand and explains why tourism grows faster than the global economy as such or why the income elasticity is above 1: tourism is a luxury good, and structural change in demand is a key factor in analysing its development. Once saturation has been achieved in basic needs and durable goods, a growing economy has more money left to spend on, first, leisure and tourism services and, secondly, knowledge-based goods and services. In contrast to manufacturing, opportunities to increase productivity are limited in the tourism industry. Because there are fewer options for rationalization, tourism services become more expensive in the long term than manufactured goods or other services, and this weakens the demand-triggered growth effect. Neverth...

Abstract: This paper develops a multilevel structural factor model to study international output comovement and its underlying driving forces. Our method combines a structural vector autoregression with a multilevel factor model, which helps us understand the economic meaning of the estimated factors. Using quarterly data of real GDP growth covering 9 emerging Asian economies and G-7 countries, we estimate a global supply factor, a global demand factor, and group supply and demand factors for each group of the economies. We find that although the role of the global factors has intensified over the past 15 years for most of the economies, output fluctuations in Asia have remained less synchronized with the global factor than those in the industrial countries. The Asian regional factors have become increasingly important in tightening the interdependence within the region over time. Therefore, although emerging Asian economies cannot ‘decouple’ completely from the advanced economies, they have, nonetheless, sustained a strong independent cycle among themselves. We also find that synchronized supply shocks contributed more to the observed synchronization in output fluctuations among the Asian economies than demand shocks. This points to the role of productivity enhancement and transmission of other supply shocks through, for example, vertical trade integration, rather than dependence on external demand, as the primary source of business cycle synchronization in emerging Asia.