Properties Of Portfolio Based Estimates Of Market Risk Premia

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Properties of Portfolio-Based Estimates of Market Risk Premia

Author : Robert A. Connolly
Publisher :
ISBN 13 :
Total Pages : 46 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Properties of Portfolio-Based Estimates of Market Risk Premia by : Robert A. Connolly

Download or read book Properties of Portfolio-Based Estimates of Market Risk Premia written by Robert A. Connolly and published by . This book was released on 2012 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use simulation to assess the performance of conventional financial econometric methods in recovering accurate estimates of market risk premia. In this study, we focus particular attention on the properties of standard cross-sectional risk premium estimation methods using portfolios and make several contributions. First, we confirm a general finding reported elsewhere that standard cross-sectional regression methods can produce accurate point estimates of market risk premia under ideal conditions, but they typically have very large standard errors. Our simulations show that existing standard error adjustments generally have limited practical importance. We propose a bootstrap approach and show that it can produce suitable standard errors. Second, when the market index is misspecified, we demonstrate that the biases in market risk premium estimates can be huge, even when the market proxy is highly correlated with the true market portfolio. We show that the pure cross-sectional method, in which in-sample mean excess returns are regressed against in-sample portfolio betas, is generally superior to the Fama-MacBeth method in estimating market risk premia with the least bias. We also demonstrate that the optimal number of portfolios to use in cross-sectional regressions depends critically on the estimation method, the accuracy of the market proxy, and whether the aim is to compute the best point estimate of the market risk premium or the standard error of the estimate. Finally, as an alternative to the cross-sectional method, we find that the mean of an excess index return provides a more efficient estimate of the market risk premium compared with a cross-sectional estimate, but only when the market index employed for both closely approximates the true market portfolio.

Risk and Return for Regulated Industries

Author : Bente Villadsen
Publisher : Academic Press
ISBN 13 : 0128125888
Total Pages : 362 pages
Book Rating : 4.1/5 (281 download)

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Book Synopsis Risk and Return for Regulated Industries by : Bente Villadsen

Download or read book Risk and Return for Regulated Industries written by Bente Villadsen and published by Academic Press. This book was released on 2017-04-27 with total page 362 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risk and Return for Regulated Industries provides a much-needed, comprehensive review of how cost of capital risk arises and can be measured, how the special risks regulated industries face affect fair return, and the challenges that regulated industries are likely to face in the future. Rather than following the trend of broad industry introductions or textbook style reviews of utility finance, it covers the topics of most interest to regulators, regulated companies, regulatory lawyers, and rate-of-return analysts in all countries. Accordingly, the book also includes case studies about various countries and discussions of the lessons international regulatory procedures can offer. - Presents a unified treatment of the regulatory principles and practices used to assess the required return on capital - Addresses current practices before exploring the ways methods play out in practice, including irregularities, shortcomings, and concerns for the future - Focuses on developed economies instead of providing a comprehensive global reviews - Foreword by Stewart C. Myers

The Equity Risk Premium

Author : William N. Goetzmann
Publisher : Oxford University Press
ISBN 13 : 0199881979
Total Pages : 568 pages
Book Rating : 4.1/5 (998 download)

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Book Synopsis The Equity Risk Premium by : William N. Goetzmann

Download or read book The Equity Risk Premium written by William N. Goetzmann and published by Oxford University Press. This book was released on 2006-11-16 with total page 568 pages. Available in PDF, EPUB and Kindle. Book excerpt: What is the return to investing in the stock market? Can we predict future stock market returns? How have equities performed over the last two centuries? The authors in this volume are among the leading researchers in the study of these questions. This book draws upon their research on the stock market over the past two dozen years. It contains their major research articles on the equity risk premium and new contributions on measuring, forecasting, and timing stock market returns, together with new interpretive essays that explore critical issues and new research on the topic of stock market investing. This book is aimed at all readers interested in understanding the empirical basis for the equity risk premium. Through the analysis and interpretation of two scholars whose research contributions have been key factors in the modern debate over stock market perfomance, this volume engages the reader in many of the key issues of importance to investors. How large is the premium? Is history a reliable guide to predict future equity returns? Does the equity and cash flows of the market? Are global equity markets different from those in the United States? Do emerging markets offer higher or lower equity risk premia? The authors use the historical performance of the world's stock markets to address these issues.

The Market Risk Premium

Author : Robert S. Harris
Publisher :
ISBN 13 :
Total Pages : 26 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis The Market Risk Premium by : Robert S. Harris

Download or read book The Market Risk Premium written by Robert S. Harris and published by . This book was released on 2001 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use expectational date from financial analysts to estimate a market risk premium for U.S. stocks. Using the SP500 as a proxy for the market portfolio, we find an average market risk premium of 7.14% above yields on long-term U.S. government bonds over the period of 1982-1998. We also find that risk premium varies over time and that much of this variation can be explained by either the level of interest rates or readily available forward-looking proxies for risk. The market risk premium appears to move inversely with government interest rates suggesting that required returns on stocks are more stable than interest rates themselves.

The Equity Risk Premium: A Contextual Literature Review

Author : Laurence B. Siegel
Publisher : CFA Institute Research Foundation
ISBN 13 : 1944960325
Total Pages : 69 pages
Book Rating : 4.9/5 (449 download)

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Book Synopsis The Equity Risk Premium: A Contextual Literature Review by : Laurence B. Siegel

Download or read book The Equity Risk Premium: A Contextual Literature Review written by Laurence B. Siegel and published by CFA Institute Research Foundation. This book was released on 2017-12-08 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research into the equity risk premium, often considered the most important number in finance, falls into three broad groupings. First, researchers have measured the margin by which equity total returns have exceeded fixed-income or cash returns over long historical periods and have projected this measure of the equity risk premium into the future. Second, the dividend discount model—or a variant of it, such as an earnings discount model—is used to estimate the future return on an equity index, and the fixed-income or cash yield is then subtracted to arrive at an equity risk premium expectation or forecast. Third, academics have used macroeconomic techniques to estimate what premium investors might rationally require for taking the risk of equities. Current thinking emphasizes the second, or dividend discount, approach and projects an equity risk premium centered on 3½% to 4%.

Financial Markets and the Real Economy

Author : John H. Cochrane
Publisher : Now Publishers Inc
ISBN 13 : 1933019158
Total Pages : 117 pages
Book Rating : 4.9/5 (33 download)

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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.

Stocks, Bonds, Bills, and Inflation

Author : Roger G. Ibbotson
Publisher :
ISBN 13 : 9781556232312
Total Pages : 202 pages
Book Rating : 4.2/5 (323 download)

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Book Synopsis Stocks, Bonds, Bills, and Inflation by : Roger G. Ibbotson

Download or read book Stocks, Bonds, Bills, and Inflation written by Roger G. Ibbotson and published by . This book was released on 1989 with total page 202 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Property Investment Theory

Author : A Macleary
Publisher : Taylor & Francis
ISBN 13 : 1135834210
Total Pages : 175 pages
Book Rating : 4.1/5 (358 download)

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Book Synopsis Property Investment Theory by : A Macleary

Download or read book Property Investment Theory written by A Macleary and published by Taylor & Francis. This book was released on 2003-09-02 with total page 175 pages. Available in PDF, EPUB and Kindle. Book excerpt: This up-to-date reference on property investment highlights the problems with existing techniques of property valuation and appraisal and identifies possible ways forward for both research and practice.

Handbook of the Equity Risk Premium

Author : Rajnish Mehra
Publisher : Elsevier
ISBN 13 : 0080555853
Total Pages : 635 pages
Book Rating : 4.0/5 (85 download)

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Book Synopsis Handbook of the Equity Risk Premium by : Rajnish Mehra

Download or read book Handbook of the Equity Risk Premium written by Rajnish Mehra and published by Elsevier. This book was released on 2011-08-11 with total page 635 pages. Available in PDF, EPUB and Kindle. Book excerpt: Edited by Rajnish Mehra, this volume focuses on the equity risk premium puzzle, a term coined by Mehra and Prescott in 1985 which encompasses a number of empirical regularities in the prices of capital assets that are at odds with the predictions of standard economic theory.

Market Risk Premium

Author : Pablo Fernandez
Publisher :
ISBN 13 :
Total Pages : 27 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Market Risk Premium by : Pablo Fernandez

Download or read book Market Risk Premium written by Pablo Fernandez and published by . This book was released on 2004 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: The market risk premium is one of the most important but elusive parameters in finance. It is also called equity premium, market premium and risk premium. The term market risk premium is difficult to understand because it is used to designate three different concepts:1. Required market risk premium. It is the incremental return of a diversified portfolio (the market) over the risk-free rate (return of treasury bonds) required by an investor. It is needed for calculating the required return to equity (cost of equity).2. Historical market risk premium. It is the historical differential return of the stock market over treasury bonds.3. Expected market risk premium. It is the expected differential return of the stock market over treasury bonds.Many authors and finance practitioners assume that expected market risk premium is equal to the historical market risk premium and to the required market risk premium. The CAPM assumes that the required market risk premium is equal to the expected market risk premium. The three concepts are different. The historical market risk premium is equal for all investors, but the required and the expected market risk premium are different for different investors. We also claim that there is no required market risk premium for the market as a whole: different investors use different required market risk premiums.

Mergers, Acquisitions, and Other Restructuring Activities

Author : Donald DePamphilis
Publisher : Academic Press
ISBN 13 : 0123854857
Total Pages : 784 pages
Book Rating : 4.1/5 (238 download)

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Book Synopsis Mergers, Acquisitions, and Other Restructuring Activities by : Donald DePamphilis

Download or read book Mergers, Acquisitions, and Other Restructuring Activities written by Donald DePamphilis and published by Academic Press. This book was released on 2011-08-22 with total page 784 pages. Available in PDF, EPUB and Kindle. Book excerpt: Two strengths distinguish this textbook from others. One is its presentation of subjects in the contexts wherein they occur. The other is its use of current events. Other improvements have shortened and simplified chapters, increased the numbers and types of pedagogical supplements, and expanded the international appeal of examples.

Quantifying the Market Risk Premium Phenomenon for Investment Decision Making

Author : William F. Sharpe
Publisher : Cfa
ISBN 13 :
Total Pages : 104 pages
Book Rating : 4.3/5 ( download)

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Book Synopsis Quantifying the Market Risk Premium Phenomenon for Investment Decision Making by : William F. Sharpe

Download or read book Quantifying the Market Risk Premium Phenomenon for Investment Decision Making written by William F. Sharpe and published by Cfa. This book was released on 1990 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Handbook of the Economics of Finance

Author : George M. Constantinides
Publisher : Elsevier
ISBN 13 : 0080495079
Total Pages : 654 pages
Book Rating : 4.0/5 (84 download)

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Book Synopsis Handbook of the Economics of Finance by : George M. Constantinides

Download or read book Handbook of the Economics of Finance written by George M. Constantinides and published by Elsevier. This book was released on 2003-11-04 with total page 654 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volume 1A covers corporate finance: how businesses allocate capital - the capital budgeting decision - and how they obtain capital - the financing decision. Though managers play no independent role in the work of Miller and Modigliani, major contributions in finance since then have shown that managers maximize their own objectives. To understand the firm's decisions, it is therefore necessary to understand the forces that lead managers to maximize the wealth of shareholders.

Multinational Financial Management

Author : Alan C. Shapiro
Publisher : John Wiley & Sons
ISBN 13 : 1119559847
Total Pages : 624 pages
Book Rating : 4.1/5 (195 download)

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Book Synopsis Multinational Financial Management by : Alan C. Shapiro

Download or read book Multinational Financial Management written by Alan C. Shapiro and published by John Wiley & Sons. This book was released on 2019-12-12 with total page 624 pages. Available in PDF, EPUB and Kindle. Book excerpt: The eleventh edition of Multinational Financial Management is a comprehensive survey of the essential areas of the international financial market environment, including foreign exchange and derivative markets, risk management, and international capital markets and portfolio investment. Designed for upper-level undergraduate and masters-level courses in international finance and management, this textbook offers readers a conceptual framework for analyzing key financial decisions of multinational firms. The authors both explain and simplify multinational financial management by illustrating how its basic principles share the same foundation as domestic corporate finance. Assuming no prior knowledge of international economics or finance, this substantially revised new edition builds upon the fundamental principles of domestic financial management to examine the unique dimensions of international finance. Readers are presented with a solid theoretical knowledgebase for examining decision problems, as well as practical analytical techniques that clarify the often-ambiguous guidelines used by international financial executives. All the traditional areas of corporate finance are explored from the perspective of a multinational corporation, focusing on elements rarely encountered in domestic finance such as multiple currencies, segmented capital markets, and political risks of nationalization or expropriation.

Cointegration, Causality, and Forecasting

Author : Halbert White
Publisher : Oxford University Press, USA
ISBN 13 : 9780198296836
Total Pages : 512 pages
Book Rating : 4.2/5 (968 download)

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Book Synopsis Cointegration, Causality, and Forecasting by : Halbert White

Download or read book Cointegration, Causality, and Forecasting written by Halbert White and published by Oxford University Press, USA. This book was released on 1999 with total page 512 pages. Available in PDF, EPUB and Kindle. Book excerpt: A collection of essays in honour of Clive Granger. The chapters are by some of the world's leading econometricians, all of whom have collaborated with and/or studied with both) Clive Granger. Central themes of Granger's work are reflected in the book with attention to tests for unit roots and cointegration, tests of misspecification, forecasting models and forecast evaluation, non-linear and non-parametric econometric techniques, and overall, a careful blend of practical empirical work and strong theory. The book shows the scope of Granger's research and the range of the profession that has been influenced by his work.

Equity Asset Valuation

Author : Jerald E. Pinto
Publisher : John Wiley & Sons
ISBN 13 : 1119104645
Total Pages : 624 pages
Book Rating : 4.1/5 (191 download)

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Book Synopsis Equity Asset Valuation by : Jerald E. Pinto

Download or read book Equity Asset Valuation written by Jerald E. Pinto and published by John Wiley & Sons. This book was released on 2015-10-16 with total page 624 pages. Available in PDF, EPUB and Kindle. Book excerpt: Navigate equity investments and asset valuation with confidence Equity Asset Valuation, Third Edition blends theory and practice to paint an accurate, informative picture of the equity asset world. The most comprehensive resource on the market, this text supplements your studies for the third step in the three-level CFA certification program by integrating both accounting and finance concepts to explore a collection of valuation models and challenge you to determine which models are most appropriate for certain companies and circumstances. Detailed learning outcome statements help you navigate your way through the content, which covers a wide range of topics, including how an analyst approaches the equity valuation process, the basic DDM, the derivation of the required rate of return within the context of Markowitz and Sharpe's modern portfolio theory, and more. Equity investments encompass the buying and holding of shares of stock in the anticipation of collecting income from dividends and capital gains. Determining which shares will be profitable is key, and an array of valuation techniques is applied on today's market to decide which stocks are ripe for investment and which are best left out of your portfolio. Access the most comprehensive equity asset valuation text on the market Leverage detailed learning outcome statements that focus your attention on key concepts, and guide you in applying the material accurately and effectively Explore a wide range of essential topics, such as the free cash flow approach, valuation using Graham and Dodd type concepts of earning power, associated market multiples, and residual income models Improve your study efforts by leveraging the text during your CFA certification program prep Equity Asset Valuation, Third Edition is a comprehensive, updated text that guides you through the information you need to know to fully understand the general analysis of equity investments.

Financial Markets Theory

Author : Emilio Barucci
Publisher : Springer
ISBN 13 : 1447173228
Total Pages : 843 pages
Book Rating : 4.4/5 (471 download)

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Book Synopsis Financial Markets Theory by : Emilio Barucci

Download or read book Financial Markets Theory written by Emilio Barucci and published by Springer. This book was released on 2017-06-08 with total page 843 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work, now in a thoroughly revised second edition, presents the economic foundations of financial markets theory from a mathematically rigorous standpoint and offers a self-contained critical discussion based on empirical results. It is the only textbook on the subject to include more than two hundred exercises, with detailed solutions to selected exercises. Financial Markets Theory covers classical asset pricing theory in great detail, including utility theory, equilibrium theory, portfolio selection, mean-variance portfolio theory, CAPM, CCAPM, APT, and the Modigliani-Miller theorem. Starting from an analysis of the empirical evidence on the theory, the authors provide a discussion of the relevant literature, pointing out the main advances in classical asset pricing theory and the new approaches designed to address asset pricing puzzles and open problems (e.g., behavioral finance). Later chapters in the book contain more advanced material, including on the role of information in financial markets, non-classical preferences, noise traders and market microstructure. This textbook is aimed at graduate students in mathematical finance and financial economics, but also serves as a useful reference for practitioners working in insurance, banking, investment funds and financial consultancy. Introducing necessary tools from microeconomic theory, this book is highly accessible and completely self-contained. Advance praise for the second edition: "Financial Markets Theory is comprehensive, rigorous, and yet highly accessible. With their second edition, Barucci and Fontana have set an even higher standard!"Darrell Duffie, Dean Witter Distinguished Professor of Finance, Graduate School of Business, Stanford University "This comprehensive book is a great self-contained source for studying most major theoretical aspects of financial economics. What makes the book particularly useful is that it provides a lot of intuition, detailed discussions of empirical implications, a very thorough survey of the related literature, and many completely solved exercises. The second edition covers more ground and provides many more proofs, and it will be a handy addition to the library of every student or researcher in the field."Jaksa Cvitanic, Richard N. Merkin Professor of Mathematical Finance, Caltech "The second edition of Financial Markets Theory by Barucci and Fontana is a superb achievement that knits together all aspects of modern finance theory, including financial markets microstructure, in a consistent and self-contained framework. Many exercises, together with their detailed solutions, make this book indispensable for serious students in finance."Michel Crouhy, Head of Research and Development, NATIXIS