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Using Production Based Asset Pricing To Explain The Behavior Of Stock Returns Over The Business Cycle
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Book Synopsis Using Production Based Asset Pricing to Explain the Behavior of Stock Returns Over the Business Cycle by : John H. Cochrane
Download or read book Using Production Based Asset Pricing to Explain the Behavior of Stock Returns Over the Business Cycle written by John H. Cochrane and published by . This book was released on 2001 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The investment return is defined as the real return that results from marginally increasing investment at date r, and then reaping the extra output and decreasing investment at date t+1 to leave the production plan for other dates unchanged. This paper constructs investment returns from investment data and a production function, and compares investment returns to stock returns, in order to explain forecasts of stock returns by business cycle related variables, and to explain forecasts of future economic activity by stock returns.
Book Synopsis Using Production Based Asset Pricing to Explain the Behavior of Stock Returns Over the Business Cycle by :
Download or read book Using Production Based Asset Pricing to Explain the Behavior of Stock Returns Over the Business Cycle written by and published by . This book was released on 1989 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Production-based Asset Pricing and the Link Between Stock Returns and Economic Fluctuations by : John Howland Cochrane
Download or read book Production-based Asset Pricing and the Link Between Stock Returns and Economic Fluctuations written by John Howland Cochrane and published by . This book was released on 1990 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Global Stock Markets by : Wolfgang Drobetz
Download or read book Global Stock Markets written by Wolfgang Drobetz and published by Springer Science & Business Media. This book was released on 2000-10-30 with total page 358 pages. Available in PDF, EPUB and Kindle. Book excerpt: Wolfgang Drobetz provides empirical evidence on the time variation of expected stock returns over the stages of the business cycle.
Book Synopsis Asset Pricing Theory by : Costis Skiadas
Download or read book Asset Pricing Theory written by Costis Skiadas and published by Princeton University Press. This book was released on 2009-02-09 with total page 363 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asset Pricing Theory is an advanced textbook for doctoral students and researchers that offers a modern introduction to the theoretical and methodological foundations of competitive asset pricing. Costis Skiadas develops in depth the fundamentals of arbitrage pricing, mean-variance analysis, equilibrium pricing, and optimal consumption/portfolio choice in discrete settings, but with emphasis on geometric and martingale methods that facilitate an effortless transition to the more advanced continuous-time theory. Among the book's many innovations are its use of recursive utility as the benchmark representation of dynamic preferences, and an associated theory of equilibrium pricing and optimal portfolio choice that goes beyond the existing literature. Asset Pricing Theory is complete with extensive exercises at the end of every chapter and comprehensive mathematical appendixes, making this book a self-contained resource for graduate students and academic researchers, as well as mathematically sophisticated practitioners seeking a deeper understanding of concepts and methods on which practical models are built. Covers in depth the modern theoretical foundations of competitive asset pricing and consumption/portfolio choice Uses recursive utility as the benchmark preference representation in dynamic settings Sets the foundations for advanced modeling using geometric arguments and martingale methodology Features self-contained mathematical appendixes Includes extensive end-of-chapter exercises
Book Synopsis Explaining Asset Return Properties with a Real Business Cycle Asset Pricing Model by : Terence Khoo
Download or read book Explaining Asset Return Properties with a Real Business Cycle Asset Pricing Model written by Terence Khoo and published by . This book was released on 1992 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 Asset Pricing in Production Economies with Extrapolative Expectations by : David A. Hirshleifer
Download or read book Asset Pricing in Production Economies with Extrapolative Expectations written by David A. Hirshleifer and published by . This book was released on 2015 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Introducing extrapolative bias into a standard production-based model with recursive preferences reconciles salient stylized facts about business cycles (low consumption volatility, high investment volatility relative to output) and financial markets (high equity premium, volatile stock returns, low and smooth riskfree rate) with plausible levels of risk aversion and intertemporal elasticity of substitution. Furthermore, the model captures return predictability based upon dividend yield, Q, and investment. Intuitively, extrapolative bias increases the variation in the wealth-consumption ratio, which is heavily priced under recursive preferences; adjustment costs decrease the covariance between marginal utility and asset returns. We provide empirical support for key implications of the model.
Book Synopsis Empirical Asset Pricing by : Wayne Ferson
Download or read book Empirical Asset Pricing written by Wayne Ferson and published by MIT Press. This book was released on 2019-03-12 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.
Book Synopsis Production Based Asset Pricing by : John H. Cochrane
Download or read book Production Based Asset Pricing written by John H. Cochrane and published by . This book was released on 1988 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper exploits producer's first order conditions to link asset prices to data on investment, output, etc. through marginal rates of transformation, just as consumer's first order conditions are commonly used to link asset prices to consumption data or proxies through marginal rates of substitution. It presents simulation economies analogous to the consumption based models of Mehra and Prescott (1985) and Backus, Gregory and Ziri (1986) that capture the size of the equity premium and the size and cyclical timing of the forward rate term premium.
Book Synopsis Asset Prices and Business Cycles with Financial Shocks by : Pedram Nezafat
Download or read book Asset Prices and Business Cycles with Financial Shocks written by Pedram Nezafat and published by . This book was released on 2015 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a production based asset pricing model with financially constrained firms to explain the observed high asset price volatility. Investment opportunities are scarce and firms face two shocks: classic productivity shocks and financial shocks that affect the tightness of the financial constraint. The source of asset price volatility in the model is the interaction between the scarcity of investment opportunities and time variation in the tightness of the financial constraint. We calibrate the model to the U.S. data and find that it generates a volatility in the price of equity comparable to the observed aggregate stock market volatility. The model also fits key aspects of the behavior of aggregate quantities, in particular, the volatility of aggregate consumption and investment.
Book Synopsis Expected Stock Returns, Real Business Activity and Consumption Smoothing by : Hany A. Shawky
Download or read book Expected Stock Returns, Real Business Activity and Consumption Smoothing written by Hany A. Shawky and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a general equilibrium asset-pricing model that incorporates both production technology and consumption-smoothing behavior. It shows that technology and productivity shocks, labor input and capital stock are important factors in explaining the behavior of expected asset returns. Empirical tests indicate that, while technology shocks and growth in capital stock are significant factors in explaining asset returns, it is the labor growth variable that appears to provide most of the explanatory power. Furthermore, our results indicate that investors are likely to have high levels of relative risk aversion as well as consumption-smoothing behavior.
Book Synopsis An Overview of Asset Pricing Models by : Mohamed Ismail Mohamed Riyath
Download or read book An Overview of Asset Pricing Models written by Mohamed Ismail Mohamed Riyath and published by . This book was released on 2015-12-09 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research Paper from the year 2015 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, course: Higher National Diploma in Accountancy (HNDA), language: English, comment: The author of this text is a non-native speaker of English. Please excuse any linguistic mistakes., abstract: The term financial market describes any marketplace where lenders, i.e. those who have excess fund, and borrowers, i.e. those who need funds, meet together for an exchange of instruments such as equities, bonds, currencies and derivatives. The lenders in the financial market are called investors who buy financial instruments. The investors invest their fund to maximize their wealth. In reality investors are unable to achieve their objectives at all due to poor performance of respective stock and the market conditions when they are investing in equities. The reason could be the assets may underpriced or overpriced when making investment decisions. If the investors are priced correctly for the asset by considering all relevant factors which are affecting the value, they can enjoy normal profit by appropriately pricing the asset in an efficient market. It has always been the challenge of explaining the decision process of the investors in the stock market. In this context, the behavior of investor has a close relationship with the investment decisions and the way of enriching. The rate of return and its determinations are the major issues in Finance. The rate of return is one of fundamental criteria for allocation of resources and analysis of risk and return. Their importance can be observed in the field of corporate and personal finance when define the viability of an investment and making investment decisions. Stock returns is always be considered as the principal point when investors going to put their money in financial market. More profit have been involved in higher risk, and vice versa. Investors should take into account their decision to invest t
Book Synopsis Production-based Asset Pricing by : Zhi Wang
Download or read book Production-based Asset Pricing written by Zhi Wang and published by . This book was released on 2000 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper empirically tests the production-based asset pricing model (PCAPM) using industry-level data. Specifically, I examine the pricing relationship between physical investment returns and equity returns by testing the hypothesis (spanning assumption) that the payoff space of physical investment spans the payoff space of financial securities. Instead of following the traditional approach of testing a linear physical investment factor pricing model, I propose a new testing procedure based on entropic principles and no-arbitrage constraints. The proposed nonparametric method recovers and compares the state price densities for physical investment returns and equity returns. The new testing procedure has two main advantages over the traditional approach. First, the new method is consistent with no-arbitrage conditions while the traditional approach leads to a stochastic discount factor that may take negative values. Second, the new method alleviates the joint hypothesis test problem suffered by the traditional approach. I apply the proposed procedure to the following six industries: mining, construction, manufacturing, transportation, communication, and public utilities. The empirical results show that the state price density recovered from physical investment returns is able to correctly price the corresponding equity returns. This provides supporting evidence that the spanning assumption holds at the cross-industry level. Furthermore, this study highlights the fact that physical capital investment conveys important information for pricing financial securities. Hence, to explain both the time series and the cross-sectional variations in equity returns, it is useful to develop models that explicitly address the impact of key production characteristics on financial asset pricing.
Book Synopsis A Cross-Sectional Test of a Production-Based Asset Pricing Model by : John H. Cochrane
Download or read book A Cross-Sectional Test of a Production-Based Asset Pricing Model written by John H. Cochrane and published by . This book was released on 1996 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper tests a factor pricing model for stock returns. The factors are returns on physical investment, inferred from investment data via a production function. The tests examine the model's ability to explain the variation in expected returns across assets and over time. The model is not rejected. It performs about as well as the CAPM and the Chen, Roll and Ross factor model, and it performs substantially better than a simple consumption-based model. In comparison tests, the investment return factors drive out all the other models. The paper also provides an easy technique for estimating and testing dynamic, conditional asset pricing models. All one has to do is include factors and returns scaled by instruments in an unconditional estimate. This procedure imposes none of the usual restrictions on conditional moments, and does not require prewhitened or orthogonalized factors.
Book Synopsis A Cross-Sectional Test of a Production-Based Asset Pricing Model by : John H. Cochrane
Download or read book A Cross-Sectional Test of a Production-Based Asset Pricing Model written by John H. Cochrane and published by . This book was released on 2010 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper tests a factor pricing model for stock returns. The factors are returns on physical investment, inferred from investment data via a production function. The tests examine the model's ability to explain the variation in expected returns across assets and over time. The model is not rejected. It performs about as well as the CAPM and the Chen, Roll and Ross factor model, and it performs substantially better than a simple consumption-based model. In comparison tests, the investment return factors drive out all the other models. The paper also provides an easy technique for estimating and testing dynamic, conditional asset pricing models. All one has to do is include factors and returns scaled by instruments in an unconditional estimate. This procedure imposes none of the usual restrictions on conditional moments, and does not require prewhitened or orthogonalized factors.
Book Synopsis Inspecting the Mechanism by : Martin Lettau
Download or read book Inspecting the Mechanism written by Martin Lettau and published by . This book was released on 1998 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
