Kevin Aretz

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Position: Senior Lecturer in Finance
 
 

Biography

Kevin Aretz holds an MSc degree in Finance from Maastricht University (mid 2004) and a PhD degree in Finance from Lancaster University (Dec 2008). Prior to joining Manchester Business School as a senior lecturer in September 2011, he worked as a lecturer in Finance at Lancaster University Management School. He also worked, on a part-time basis, as an academic advisor for Old Mutual Asset Management in London.

Research Interests

Kevin Aretz’s research interests are in the areas of theoretical and empirical asset pricing, econometrics, especially GMM and Markov switching, forecasting and corporate bankruptcy. His recent projects contribute to the literature in the following ways:
(1) At odds with intuition, many recent empirical studies find a negative relation between firms' default probabilities and their average equity returns. In one of my recent papers, I show that a plain-vanilla asset pricing model can produce a negative relation if default risk is high and driven by changing asset volatility. Simple cross-sectional tests confirm that the negative relation does indeed only arise in the situations predicted by the theoretical model.
In another paper (with Chris Florackis and Alex Kostakis), we analyze how default risk relates to average equity returns in other, non-US markets to obtain some out-of-sample evidence on the relation.
(2) There is so far no rational theory that jointly explains intermediate-term momentum and long-term reversals in stock returns. In one of my papers (with Peter Pope and Andy Stark), we show that modelling firm value as the sum of options to produce and options to invest and assuming that investment is irreversible has some potential to jointly explain the two phenomena.
(3) Other studies have shown that lagged idiosyncratic risk relates negatively to stock returns. In a paper with Eser Arisoy, we show that this is not due to market micro-structure biases associated with small, illiquid firms (as reasoned in many other paper), but that the effect can be explained using firms’ investment behaviour.

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Showing 10 publication(s)

Journal article

  • Kevin Aretz; David Peel. "An Example of an Optimal Forecast Exhibiting Decreasing Bias with Increasing Forecast Horizon." Bulletin of Economic Research, forthcoming(2011) . eScholarID:136274
  • Kevin Aretz; Soehnke Bartram; Peter Pope. "Asymmetric Loss Functions and the Rationality of Expected Stock Returns." International Journal of Forecasting 27, no. 2(2011) : 413-437. eScholarID:136276 | DOI:10.1016/j.ijforecast.2009.10.008
  • Kevin Aretz; Peter Pope. "Common Factors in Default Risk across Countries and Industries." European Financial Management, forthcoming(2011) . eScholarID:136275 | DOI:10.1111/j.1468-036X.2010.00571.x
  • Kevin Aretz; Soehnke Bartram. "Corporate Hedging: Lessons learnt and issues to be explored." Journal of Financial Research 33, no. 4(2011) : 317-371. eScholarID:136277 | DOI:10.1111/j.1475-6803.2010.01278.x
  • Kevin Aretz; Soehnke Bartram; Peter Pope. "Macroeconomic Risks and Characteristic-based Factor Models." Journal of Banking and Finance 34, no. 6(2011) : 1383-1399. eScholarID:136278 | DOI:10.1016/j.jbankfin.2009.12.006
  • Kevin Aretz; Mark Shackleton. "Omitted Debt Risk, Financial Distress and the Cross-Section of Expected Equity Returns." Journal of Banking and Finance 35, no. 5(2011) : 1213-1227. eScholarID:136273 | DOI:10.1016/j.jbankfin.2010.10.018
  • Kevin Aretz; David Peel. "Spreads vs. Professional Forecasters as Predictors of Future Output Change." Journal of Forecasting 29, no. 6(2010) : 517-522. eScholarID:136279 | DOI:10.1002/for.1136
  • Marcel Naujoks; Kevin Aretz; Alexander Kerl; Andreas Walter. "Do German Security Analysts Herd?" Financial Markets and Portfolio Management 23, no. 1(2009) : 3-29. eScholarID:136280 | DOI:10.1007/s11408-008-0093-7
  • Kevin Aretz; David Peel. "Some Implications of a Quartic Loss Function." Economics Bulletin 7, no. 3(2007) : 1-7. eScholarID:136281
  • Kevin Aretz; Soehnke Bartram. "Why Hedge? Rationales for Corporate Hedging and Value Implications." Journal of Risk Finance 8, no. 5(2007) : 434-449. eScholarID:136282