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Estimation Of The Marginal Rate Of Substitution In The Intertemporal Capital Asset Pricing Model
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Book Synopsis Estimation of the Marginal Rate of Substitution in the Intertemporal Capital Asset Pricing Model by : Louis O. Scott
Download or read book Estimation of the Marginal Rate of Substitution in the Intertemporal Capital Asset Pricing Model written by Louis O. Scott and published by . This book was released on 1987 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Intertemporal Asset Pricing and the Marginal Rate of Substitution by : Louis O. Scott
Download or read book Intertemporal Asset Pricing and the Marginal Rate of Substitution written by Louis O. Scott and published by . This book was released on 1986 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Intertemporal Substitution, Risk Aversion and Short Term Interest Rates by : Fernando Restoy
Download or read book Intertemporal Substitution, Risk Aversion and Short Term Interest Rates written by Fernando Restoy and published by . This book was released on 1992 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the implications of a general representative agent intertemporal asset pricing model on the determination of the short term interest rates. The model includes an extension of the Non-expected Utility Isoelastic Preferences that incorporates non-separability between private consumption and government expenditure. The model yields a generalized Fisher equation where the nominal interest rates are explained by the expected depreciation of the purchasing power of money, an endogenously determined required risk free rate and an inflation risk premium. The econometric estimations suggest that the common rejection of the Fisher hypothesis can be, at least, partially explained by the traditional use of ad|hoc misspecified models. On the other hand, while the inflation risk premium is estimated to be small relative to the ex-ante real interest rate, its magnitude is substantially higher than the one obtained under the standard single-good expected utility models.
Book Synopsis Estimating the Expected Marginal Rate of Substitution by : Robert P. Flood
Download or read book Estimating the Expected Marginal Rate of Substitution written by Robert P. Flood and published by . This book was released on 2004 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Asset Pricing Model and Its Restrictions on the Intertemporal Marginal Rate of Substitution by : Shigeyuki Hamori
Download or read book Asset Pricing Model and Its Restrictions on the Intertemporal Marginal Rate of Substitution written by Shigeyuki Hamori and published by . This book was released on 1993 with total page 7 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Testing Volatility Restrictions on Intertemporal Marginal Rates of Substitution Implied by Euler Equations and Asset Returns by : Stephen Giovanni Cecchetti
Download or read book Testing Volatility Restrictions on Intertemporal Marginal Rates of Substitution Implied by Euler Equations and Asset Returns written by Stephen Giovanni Cecchetti and published by . This book was released on 1992 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Euler equations derived from a broad range of intertemporal asset pricing models, together with the first two unconditional moments of asset returns, imply a lower bound on the volatility of the intertemporal marginal rate of substitution. We develop and implement statistical tests of these lower bound restrictions. We conclude that the availability of relatively short time series of consumption data undermines the ability of tests that use the restrictions implied by the volatility bound to discriminate among different utility functions.
Download or read book Asset Pricing written by John H. Cochrane and published by Princeton University Press. This book was released on 2009-04-11 with total page 560 pages. Available in PDF, EPUB and Kindle. Book excerpt: Winner of the prestigious Paul A. Samuelson Award for scholarly writing on lifelong financial security, John Cochrane's Asset Pricing now appears in a revised edition that unifies and brings the science of asset pricing up to date for advanced students and professionals. Cochrane traces the pricing of all assets back to a single idea--price equals expected discounted payoff--that captures the macro-economic risks underlying each security's value. By using a single, stochastic discount factor rather than a separate set of tricks for each asset class, Cochrane builds a unified account of modern asset pricing. He presents applications to stocks, bonds, and options. Each model--consumption based, CAPM, multifactor, term structure, and option pricing--is derived as a different specification of the discounted factor. The discount factor framework also leads to a state-space geometry for mean-variance frontiers and asset pricing models. It puts payoffs in different states of nature on the axes rather than mean and variance of return, leading to a new and conveniently linear geometrical representation of asset pricing ideas. Cochrane approaches empirical work with the Generalized Method of Moments, which studies sample average prices and discounted payoffs to determine whether price does equal expected discounted payoff. He translates between the discount factor, GMM, and state-space language and the beta, mean-variance, and regression language common in empirical work and earlier theory. The book also includes a review of recent empirical work on return predictability, value and other puzzles in the cross section, and equity premium puzzles and their resolution. Written to be a summary for academics and professionals as well as a textbook, this book condenses and advances recent scholarship in financial economics.
Book Synopsis Risk aversion and intertemporal substitution in the capital asset pricing model by : Alberto Giovannini
Download or read book Risk aversion and intertemporal substitution in the capital asset pricing model written by Alberto Giovannini and published by . This book was released on 1989 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Estimation and Test of a Simple Model of Intertemporal Capital Asset Pricing by : Michael J. Brennan
Download or read book Estimation and Test of a Simple Model of Intertemporal Capital Asset Pricing written by Michael J. Brennan and published by . This book was released on 2008 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: A simple valuation model that allows for time variation in investment opportunities is developed and estimated. The model assumes that the investment opportunity set is completely described by two state variables, the real interest rate and the maximum Sharpe ratio, which follow correlated Ornstein-Uhlenbeck processes. The model parameters and time series of the state variables are estimated using data on US Treasury bond yields and inflation for the period January 1952 to December 2000. The estimated state variables are shown to be related to the equity premium and to the level of stock prices as measured by the dividend yield. Innovations in the estimated state variables are shown to be related to the returns on the Fama-French arbitrage portfolios, HML and SMB, providing a possible explanation for the risk premia on these portfolios. When tracking portfolios for the state variable innovations are constructed using returns on 6 size and book-to market equity sorted portfolios, the tracking portfolios explain the risk premia on HML and SMB, and these state variable tracking portfolios perform about as well as HML and SMB in explaining the cross-section of returns on the 25 size and book-to market equity sorted value weighted portfolios. An additional test of the ICAPM using returns on 30 industrial portfolios does not reject the model while the CAPM and the Fama-French 3 factor model are rejected using the same data.
Book Synopsis Estimating the Expected Marginal Rate of Substitution by : Robert P. Flood
Download or read book Estimating the Expected Marginal Rate of Substitution written by Robert P. Flood and published by . This book was released on 2010 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a simple but general methodology to estimate the expected intertemporal marginal rate of substitution or quot;EMRSquot;, using only data on asset prices and returns. Our empirical strategy is general, and allows the EMRS to vary arbitrarily over time. A novel feature of our technique is that it relies upon exploiting idiosyncratic risk, since theory dictates that idiosyncratic shocks earn the EMRS. We apply our methodology to two different data sets: monthly data from 1994 through 2003, and daily data for 2003. Both data sets include assets from three different markets: the New York Stock Exchange, the NASDAQ, and the Toronto Stock Exchange. For both monthly and daily frequencies, we find plausible estimates of EMRS with considerable precision and time-series volatility. We then use these estimates to test for asset integration, both within and between stock markets. We find that all three markets seem to be internally integrated in the sense that different assets traded on a given market share the same EMRS. The technique is also powerful enough to reject integration between the three stock markets, and between stock and money markets.
Book Synopsis Estimating the Intertemporal Capital Asset Pricing Model with Cross-Sectional Consistency by : Turan G. Bali
Download or read book Estimating the Intertemporal Capital Asset Pricing Model with Cross-Sectional Consistency written by Turan G. Bali and published by . This book was released on 2012 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Testing Volatility Restrictions on Intertemporal Marginal Rates of Substitution Implied by Euler Equations and Asset Returns by : Stephen G. Cecchetti
Download or read book Testing Volatility Restrictions on Intertemporal Marginal Rates of Substitution Implied by Euler Equations and Asset Returns written by Stephen G. Cecchetti and published by . This book was released on 2007 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Euler equations derived from a broad range of intertemporal asset pricing models, together with the first two unconditional moments of asset returns, imply a lower bound on the volatility of the intertemporal marginal rate of substitution. We develop and implement statistical tests of these lower bound restrictions. We conclude that the availability of relatively short time series of consumption data undermines the ability of tests that use the restrictions implied by the volatility bound to discriminate among different utility functions.
Book Synopsis Financial Markets and the Real Economy by : John H. Cochrane
Download or read book Financial Markets and the Real Economy written by John H. Cochrane and published by Now Publishers Inc. This book was released on 2005 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Book Synopsis Risk Aversion and Intertemporal Substitution in the Capital Asset Pricing Model by : Philippe Weil
Download or read book Risk Aversion and Intertemporal Substitution in the Capital Asset Pricing Model written by Philippe Weil and published by . This book was released on 2010 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: When tastes are represented by a class of generalized preferences which -- unlike traditional Von-Neumann preferences -- do not confuse behavior towards risk with attitudes towards intertemporal substitution, the true beta of an asset is, in general, an average of its consumption and market betas. We show that the two parameters measuring risk aversion and intertemporal substitution affect consumption and portfolio allocation decisions in symmetrical ways. A unit elasticity of intertemporal substitution gives rise to myopia in consumption-savings decisions (the future does not affect the optimal consumption plan), while a unit coefficient of relative risk aversion gives rise to myopia in portfolio allocation (the future does not affect optimal portfolio allocation). The empirical evidence is consistent with the behavior of intertemporal maximizers who have a unit coefficient of relative risk aversion and an elasticity of intertemporal substitution different from 1.
Download or read book BEBR Faculty Working Paper written by and published by . This book was released on 1980 with total page 374 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Intertemporal Asset Pricing by : Bernd Meyer
Download or read book Intertemporal Asset Pricing written by Bernd Meyer and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 295 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the mid-eighties Mehra and Prescott showed that the risk premium earned by American stocks cannot reasonably be explained by conventional capital market models. Using time additive utility, the observed risk pre mium can only be explained by unrealistically high risk aversion parameters. This phenomenon is well known as the equity premium puzzle. Shortly aft erwards it was also observed that the risk-free rate is too low relative to the observed risk premium. This essay is the first one to analyze these puzzles in the German capital market. It starts with a thorough discussion of the available theoretical mod els and then goes on to perform various empirical studies on the German capital market. After discussing natural properties of the pricing kernel by which future cash flows are translated into securities prices, various multi period equilibrium models are investigated for their implied pricing kernels. The starting point is a representative investor who optimizes his invest ment and consumption policy over time. One important implication of time additive utility is the identity of relative risk aversion and the inverse in tertemporal elasticity of substitution. Since this identity is at odds with reality, the essay goes on to discuss recursive preferences which violate the expected utility principle but allow to separate relative risk aversion and intertemporal elasticity of substitution.
Book Synopsis Risk Management, Speculation, and Derivative Securities by : Geoffrey Poitras
Download or read book Risk Management, Speculation, and Derivative Securities written by Geoffrey Poitras and published by Elsevier. This book was released on 2002-07-12 with total page 622 pages. Available in PDF, EPUB and Kindle. Book excerpt: Its unified treatment of derivative security applications to both risk management and speculative trading separates this book from others. Presenting an integrated explanation of speculative trading and risk management from the practitioner's point of view, Risk Management, Speculation, and Derivative Securities is the only standard text on financial risk management that departs from the perspective of an agent whose main concerns are pricing and hedging derivatives. After offering a general framework for risk management and speculation using derivative securities, it explores specific applications to forward contracts and options. Not intended as a comprehensive introduction to derivative securities, Risk Management, Speculation, and Derivative Securities is the innovative, useful approach that addresses new developments in derivatives and risk management. *The only standard text on financial risk management that departs from the perspective of an agent whose main concerns are pricing and hedging derivatives*Examines speculative trading and risk management from the practitioner's point of view*Provides an innovative, useful approach that addresses new developments in derivatives and risk management
