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Heterogeneous Expectations And Bond Markets
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Book Synopsis Heterogeneous Expectations and Bond Markets by : Hongjun Yan
Download or read book Heterogeneous Expectations and Bond Markets written by Hongjun Yan and published by . This book was released on 2010 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a dynamic equilibrium model of bond markets in which two groups of agents hold heterogeneous expectations about future economic conditions. The heterogeneous expectations cause agents to take speculative positions against each other and therefore generate endogenous relative wealth fluctuation. The relative wealth fluctuation amplifies asset price volatility and contributes to the time variation in bond premia. Our model shows that a modest amount of heterogeneous expectation can help explain several puzzling phenomena, including the quot;excessive volatilityquot; of bond yields, the failure of the expectations hypothesis, and the ability of a tent-shaped linear combination of forward rates to predict bond returns.
Book Synopsis Imperfect Information and Investor Heterogeneity in the Bond Market by : Frank Riedel
Download or read book Imperfect Information and Investor Heterogeneity in the Bond Market written by Frank Riedel and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 119 pages. Available in PDF, EPUB and Kindle. Book excerpt: Real world investors differ in their tastes and attitudes and they do not have, in general, perfect information about the future prospects of the economy. Most theoretical models, however, assume to the contrary that investors are homogeneous and perfectly informed about the market. In this book, an attempt is made to overcome these shortcomings. In three different case studies, the effect of heterogeneous time preferences, heterogeneous beliefs and imperfect information about the economy's growth on the term structure of interest rates are studied. The initial chapter gives an introduction to the theory of financial markets in continuous time under imperfect information and establishes the existence of an equilibrium with complete markets.
Book Synopsis Speculation and the Bond Market by : Francisco Barillas
Download or read book Speculation and the Bond Market written by Francisco Barillas and published by . This book was released on 2017 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: An affine no-arbitrage asset pricing framework is developed that allows for agents to have rational but heterogeneous expectations. The framework can match both bond yields and the observed dispersion of yield expectations in survey data. heterogeneous information introduces a speculative component in bond prices that (i) is statistically distinct from classical components such as risk-premia and expectations about future short rates and (ii) quantitatively important, at times accounting for up to 125 basis points of US yields. Allowing for heterogeneous expectations also changes the estimated relative importance of risk-premia and expectations about future short rates in historical bond yields compared to a standard affine model. The framework imposes weaker restrictions than existing heterogeneous information asset pricing models and is thus well-suited to empirically quantify the importance of relaxing the common information assumption.
Book Synopsis A Heterogeneous-expectations Model of the Value of Bonds Learning Call Options by : Zvi Bodie
Download or read book A Heterogeneous-expectations Model of the Value of Bonds Learning Call Options written by Zvi Bodie and published by . This book was released on 1977 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Heterogeneous-expectations Model of the Value of Bonds Bearing Call Options by : Zvi Bodie
Download or read book A Heterogeneous-expectations Model of the Value of Bonds Bearing Call Options written by Zvi Bodie and published by . This book was released on 1977 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a dynamic programming model of the optimal refunding strategy and the corresponding value of a callable bond. The model differs from previous work on this subject primarily in that it explicitly admits the possibility of differences between the issuer's expectations of future interest rates and an investor's corresponding expectations. This generalization facilitates the application of the model to determine what a specific bond (issued, for example, by a particular corporation) is worth to any given investor. Additional analytical features of the model, which differ from corresponding aspects of some previous models, include the use of a stochastic discounting rate and the use of continuous distributions to characterize the relevant interest rate expectations. For the bond issuer, his own expectations (together with the bond's coupon and call features) suffice to indicate the critical refunding yield as well as the expected value of the bond in each time period until the bond matures. For an investor, however, the analytical solution of the model and the illustrative numerical examples presented in the paper show that the issuer's expectations and the investor's own both matter if the two differ.
Book Synopsis Heterogeneous Expectations, Dynamics and Stability of Markets by : Laurence Lasselle
Download or read book Heterogeneous Expectations, Dynamics and Stability of Markets written by Laurence Lasselle and published by . This book was released on 2001 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Economics of Recent Bond Yield Volatility by : C. E. V. Borio
Download or read book The Economics of Recent Bond Yield Volatility written by C. E. V. Borio and published by Bank for International Settlements. This book was released on 1996 with total page 148 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Heterogeneous-Expectations Model of the Value of Bonds Bearing Call Options by : Zvi Bodie
Download or read book Heterogeneous-Expectations Model of the Value of Bonds Bearing Call Options written by Zvi Bodie and published by . This book was released on 2010 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a dynamic programming model of the optimal refunding strategy and the corresponding value of a callable bond. The model differs from previous work on this subject primarily in that it explicitly admits the possibility of differences between the issuer's expectations of future interest rates and an investor's corresponding expectations. This generalization facilitates the application of the model to determine what a specific bond (issued, for example, by a particular corporation) is worth to any given investor. Additional analytical features of the model, which differ from corresponding aspects of some previous models, include the use of a stochastic discounting rate and the use of continuous distributions to characterize the relevant interest rate expectations. For the bond issuer, his own expectations (together with the bond's coupon and call features) suffice to indicate the critical refunding yield as well as the expected value of the bond in each time period until the bond matures. For an investor, however, the analytical solution of the model and the illustrative numerical examples presented in the paper show that the issuer's expectations and the investor's own both matter if the two differ.
Book Synopsis Expectation Formation in Financial Markets by : Bart Frijns
Download or read book Expectation Formation in Financial Markets written by Bart Frijns and published by . This book was released on 2019 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: We set up an endowment based asset pricing model in which agents have heterogeneous expectations about the future price level. Expectations are a function of fundamentals, trends, and sentiment. Agents are allowed to switch between expectation formation functions based on past performance as well as sentiment. Estimation results on the S&P500 reveal that there is heterogeneity between agents, with substantial switching between groups. We find that sentiment has a direct effect on expectations. Specifically, heterogeneity is increasing in sentiment, and sentiment reduces the frequency of switching between functions.
Book Synopsis Handbook on Systemic Risk by : Jean-Pierre Fouque
Download or read book Handbook on Systemic Risk written by Jean-Pierre Fouque and published by Cambridge University Press. This book was released on 2013-05-23 with total page 993 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook on Systemic Risk, written by experts in the field, provides researchers with an introduction to the multifaceted aspects of systemic risks facing the global financial markets. The Handbook explores the multidisciplinary approaches to analyzing this risk, the data requirements for further research, and the recommendations being made to avert financial crisis. The Handbook is designed to encourage new researchers to investigate a topic with immense societal implications as well as to provide, for those already actively involved within their own academic discipline, an introduction to the research being undertaken in other disciplines. Each chapter in the Handbook will provide researchers with a superior introduction to the field and with references to more advanced research articles. It is the hope of the editors that this Handbook will stimulate greater interdisciplinary academic research on the critically important topic of systemic risk in the global financial markets.
Book Synopsis Expectation in financial markets by : David M. Ritzwoller
Download or read book Expectation in financial markets written by David M. Ritzwoller and published by . This book was released on 2018 with total page 140 pages. Available in PDF, EPUB and Kindle. Book excerpt: Newly available panel data on investor expectations of future returns to the stock market suggest that (1) there is a large degree of heterogeneity in the ways that investors form beliefs about future stock market returns, that (2) investors frequently change the ways that they form their beliefs, that (3) investor's decisions to change the way that they form beliefs are influences by changes in market behavior, and that (4) adaptation in the ways that investors form beliefs significantly effect aggregate price dynamics. First, I reproduce, refine, and substantially expand a nonparametric procedure initially developed in Dominitz and Manski (2011) to classify investor expectations into three "expectation-types" based on how investors revise their expectations for returns relative to the change in recent returns. I find that there is substantial heterogeneity in expectation-types and frequent adaptation between expectation-types. Second, I show that the probability of transitioning to a different expectation-type is significantly correlated with the size and sign of the change in recent returns, indicating that the decision to adapt to a different expectation-type is influenced by recent market behavior. Third, I develop a simple, stylized, agent-based model of adaptation of expectation-types and argue that adaptive behavior can significantly influence aggregate price dynamics in ways consistent with observed stock market behavior.
Book Synopsis Banks and Capital Requirements by : Benjamin H. Cohen
Download or read book Banks and Capital Requirements written by Benjamin H. Cohen and published by . This book was released on 2014 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Determinants of Emerging Market Sovereign Bond Spreads by : Iva Petrova
Download or read book Determinants of Emerging Market Sovereign Bond Spreads written by Iva Petrova and published by International Monetary Fund. This book was released on 2010-12-01 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyses the determimants of emerging market sovereign bond spreads by examining the short and long-run effects of fundamental (macroeconomic) and temporary (financial market) factors on these spreads. During the current global financial and economic crisis, sovereign bond spreads widened dramatically for both developed and emerging market economies. This deterioration has widely been attributed to rapidly growing public debts and balance sheet risks. Our results indicate that in the long run, fundamentals are significant determinants of emerging market sovereign bond spreads, while in the short run, financial volatility is a more important determinant of sperads than fundamentals indicators.
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 Inflation Expectations by : Peter J. N. Sinclair
Download or read book Inflation Expectations written by Peter J. N. Sinclair and published by Routledge. This book was released on 2009-12-16 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Book Synopsis Learning and Expectations in Macroeconomics by : George W. Evans
Download or read book Learning and Expectations in Macroeconomics written by George W. Evans and published by Princeton University Press. This book was released on 2012-01-06 with total page 440 pages. Available in PDF, EPUB and Kindle. Book excerpt: A crucial challenge for economists is figuring out how people interpret the world and form expectations that will likely influence their economic activity. Inflation, asset prices, exchange rates, investment, and consumption are just some of the economic variables that are largely explained by expectations. Here George Evans and Seppo Honkapohja bring new explanatory power to a variety of expectation formation models by focusing on the learning factor. Whereas the rational expectations paradigm offers the prevailing method to determining expectations, it assumes very theoretical knowledge on the part of economic actors. Evans and Honkapohja contribute to a growing body of research positing that households and firms learn by making forecasts using observed data, updating their forecast rules over time in response to errors. This book is the first systematic development of the new statistical learning approach. Depending on the particular economic structure, the economy may converge to a standard rational-expectations or a "rational bubble" solution, or exhibit persistent learning dynamics. The learning approach also provides tools to assess the importance of new models with expectational indeterminacy, in which expectations are an independent cause of macroeconomic fluctuations. Moreover, learning dynamics provide a theory for the evolution of expectations and selection between alternative equilibria, with implications for business cycles, asset price volatility, and policy. This book provides an authoritative treatment of this emerging field, developing the analytical techniques in detail and using them to synthesize and extend existing research.
Book Synopsis Financial Markets and the Macroeconomy by : Carl Chiarella
Download or read book Financial Markets and the Macroeconomy written by Carl Chiarella and published by Routledge. This book was released on 2009-06-02 with total page 513 pages. Available in PDF, EPUB and Kindle. Book excerpt: This important new book from a group of Keynesian, but nonetheless technically-oriented economists explores one of the dominant paradigms in financial economics: the ‘intertemporal general equilibrium approach’.
