Is The Implied Equity Duration A Measure Of Stock Risk?

The duration is a measure of the average effective period of the bond,which is the actual maturity date of the bond measured after taking into account the factors of bond cash flow restrictions.At the same time,in bond investments,duration is used to measure the interest rate risk of bonds or bond portfolios.Therefore,duration is an important and mature risk characteristic of fixed-income securities.On the basis of the bond duration,foreign researchers have found that bond duration can also be applied to equity securities and can play a very important role.At the same time,the reason why the long-term rights and interests have been paid more and more attention by scholars is because the proportion of funds allocated to pension plans in Western countries is slowly approaching 50%,the concept of duration and its portfolio in securities.The role played by immunization is not limited to fixed income securities.In order to make the portfolio of stocks and fixed income investments immune to interest rate changes,the measurement of the duration of the equity is crucial.Therefore,this paper uses the implied equity duration model proposed by Dechow et al.(2004)to calculate the implied equity duration through conventional indicators such as stock market value,book value and net profit.This model is used because the implied equity duration can be linked to some of the more common valuation indicators,such as book-to-market ratio,return on net assets,and sales growth rate,so that it can not only be more reasonably estimated.The long-term rights of Chinese A-share listed companies can also better explore the sources of risk in China's A-share market.On this basis,this paper selects Shanghai and Shenzhen A-share listed companies as research samples,the research time is from 1991 to 2015,the data mainly comes from Guotai Junan CSMAR database,including the accounting and financial statement data of all listed companies in the research period.,the company's daily rate of return,monthly rate of return,and market daily rate of return and risk-free rate of return.Among them,the operating income per share as sales,earnings per share as net profit,net assets per share as book value,construct the variables needed to calculate the duration of implied equity,mainly account-to-market ratio,revenue-price ratio,sales Indicators such as growth rate.According to the research in this paper,stocks with relatively short duration of implied equity have the characteristics of lower sales growth rate and higher ROE,while for stocks with relatively long duration of implied equity,their sales growth rate is higher.And the ROE is lower.Not only that,but the study also found that the implicit equity duration can be used as the equity style and used to characterize the risk characteristics as well as the price-to-earnings ratio and the book-to-market ratio.For example,when the growth rate of stocks is very low and the ROE can quickly return to the mean,the implied equity duration is negatively correlated with the book market value ratio.At this time,the stocks with low book value ratio will have higher implicit equity.Period,when the stock growth rate is low and the ROE continues to be high,the implied equity duration is negatively correlated with the income price ratio,and the stock with lower income price will have a higher implied equity duration.This relationship illustrates that the book-to-market ratio and the price-to-price ratio may be proxy variables for the duration of the implied equity.For example,Fama and French(1995)used the book-to-market ratio to portray the risk of stocks,indicating that companies with low book-to-market ratios have higher stock returns because the equity beta is larger,but this conclusion does not indicate the behind the reason.However,the long-term implied equity has given further explanation because the stocks with lower account prices have higher implied equity durations,while the higher the implied equity duration,the more sensitive the stocks are to the yield.Therefore,there will be a higher equity beta.This also provides an easy to understand theoretical framework for explaining the rules of experience.Therefore,based on the empirical analysis results of this paper,the following conclusions are drawn:First,the correlation between the duration of implied equity and the book-to-market ratio and the ratio of income to price is more significant;second,the duration of implied equity and China A-share The overall market volatility and trait volatility are highly correlated,and can significantly predict the overall market volatility and trait volatility.Third,the implicit equity duration and value valuation indicators can have a more significant predictive effect on stock returns.Fourth,it is found that the maturity structure of stock returns in China's A-share market is inclined upwards,which is contrary to the conclusion that the foreign stock interest rate term structure is inclined downward.Therefore,in order to further explore the reasons behind this,the stock is divided into growth stocks and.value stocks.The maturity structure of stock interest rates is respectively determined.It is found that investors have a greater preference for long-term growth stocks for growth stocks.Shorter growth stocks require more risk compensation.For value stocks,there may be reasons for irrational behaviors such as overreaction,which makes investors overestimate stocks that have not performed well in the past,and overestimate stocks that performed better in the past,thus causing reverse corrections in the long run,making value The yield of stocks will be much higher than that of growth stocks,and eventually the maturity structure of stock returns in the overall market will show an upward trend.