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A Theory Of Dissimilarity Between Stochastic Discount Factors
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Book Synopsis A Theory of Dissimilarity Between Stochastic Discount Factors by : Gurdip Bakshi
Download or read book A Theory of Dissimilarity Between Stochastic Discount Factors written by Gurdip Bakshi and published by . This book was released on 2020 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes a measure of dissimilarity between stochastic discount factors (SDFs) in different economies. The SDFs are made comparable using the respective bond prices as the numeraire. The measure is dimensionless, synthesizes features of the risk-neutral moments of excess currency returns, and can be extracted from currency option prices. Linking theory to data, we provide evidence gathered from (i) the cross-section of 45 currency option prices, (ii) the time-series of currency returns, (iii) estimated SDFs using model-free restrictions, and (iv) structural models in international finance.
Book Synopsis Real-Time Distribution of Stochastic Discount Factors by : Fousseni Chabi-Yo
Download or read book Real-Time Distribution of Stochastic Discount Factors written by Fousseni Chabi-Yo and published by . This book was released on 2019 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: I use option prices to infer real-time moments of stochastic discount factors (SDFs). The moments are estimated, from daily SP 500 index option data, in real time, without relying on past observations. These moments are forward-looking and significantly predict the market excess return. The theory suggests that the SDF variance (kurtosis) is positively priced while the SDF skewness is negatively priced in the cross section of returns. A cross-sectional analysis shows that the price of risks associated with the moments of the SDF are economically and statistically significant after controlling for a comprehensible set of economic variables.
Book Synopsis Modeling and Assessing Stochastic Discount Factors by : Yan Jin
Download or read book Modeling and Assessing Stochastic Discount Factors written by Yan Jin and published by . This book was released on 1998 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis International Stochastic Discount Factors and Stochastic Correlation by :
Download or read book International Stochastic Discount Factors and Stochastic Correlation written by and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Stochastic Discount Factors (SDFs) and the Equity Premium Puzzle Under a Power Utility Specification by : German Forero Laverde
Download or read book Stochastic Discount Factors (SDFs) and the Equity Premium Puzzle Under a Power Utility Specification written by German Forero Laverde and published by . This book was released on 2013 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article analyses the stochastic discount factor (SDF) both from the equilibrium perspective, where it appears as a marginal rate of substitution, and from the arbitrage perspective, where it appears as the Radon - Nikodym derivative which allows for a change in the probability measurable space. Its study entails the use of a power utility function, deriving the marginal rate of substitution and the application of the model to Colombian time series. As a result, we confirm the existence of the equity premium puzzle.
Book Synopsis International Stochastic Discount Factors and Stochastic Correlation by :
Download or read book International Stochastic Discount Factors and Stochastic Correlation written by and published by . This book was released on 2015 with total page 179 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Frequency Decomposition of Approximation Errors in Stochastic Discount Factor Models by : Timothy Cogley
Download or read book A Frequency Decomposition of Approximation Errors in Stochastic Discount Factor Models written by Timothy Cogley and published by . This book was released on 1997 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Smart Stochastic Discount Factors by : Sofonias A. Korsaye
Download or read book Smart Stochastic Discount Factors written by Sofonias A. Korsaye and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Model-free International Stochastic Discount Factors by : Paula Mirela Sandulescu
Download or read book Model-free International Stochastic Discount Factors written by Paula Mirela Sandulescu and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Bounds on the Autocorrelation of Admissible Stochastic Discount Factors by : Stéphane Chrétien
Download or read book Bounds on the Autocorrelation of Admissible Stochastic Discount Factors written by Stéphane Chrétien and published by . This book was released on 2005 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show how to use asset market data to restrict the admissible region for the first-order autocorrelation of the stochastic discount factor (SDF). We interpret this statistic as a measure of a model's economic time variation across two periods. Estimating bounds for nominal and real SDFs at monthly and quarterly frequencies, we find that the admissible autocorrelations are significantly negative, but greater than -0.02, implying that the bounds impose a strong restriction on candidate SDFs. We illustrate the relevancy of these findings by showing that some widely used consumption-based models are misspecified with respect to the autocorrelation bound. Finally, we examine the implications of our results for the admissibility of linear factor models and the appropriateness of empirical pricing factors.
Book Synopsis Agnostic Tests of Stochastic Discount Factor Theory by : Kuntara Pukthuanthong
Download or read book Agnostic Tests of Stochastic Discount Factor Theory written by Kuntara Pukthuanthong and published by . This book was released on 2019 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose and implement tests for the existence of a common stochastic discount factor (SDF). Our tests are agnostic because they do not require macroeconomic data or preference assumptions; they depend only on observed asset returns. Our test statistic is immune to the form of the multivariate return distribution, including its factor structure. After examining test features and power with simulations, we apply the tests empirically to data on U.S. equities, bonds, currencies, commodities and real estate. The empirical evidence is consistent with a unique positive SDF that prices all U.S. assets and satisfies the Hansen/Jagannathan variance bound.
Book Synopsis Measuring Time-varying Economic Fears with Consumption-based Stochastic Discount Factors by : Belén Nieto
Download or read book Measuring Time-varying Economic Fears with Consumption-based Stochastic Discount Factors written by Belén Nieto and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Stochastic Discount Factor Volatility Upper Bound in a Mean-Variance-Skewness World by : Valerio Potì
Download or read book A Stochastic Discount Factor Volatility Upper Bound in a Mean-Variance-Skewness World written by Valerio Potì and published by . This book was released on 2007 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper employs a stochastic discount factor (SDF) volatility upper bound to limit the attainable maximal Sharpe ratio and thus, together with a no arbitrage condition, to rule out quot;good deals.quot; While no-arbitrage and the SDF volatility bound imply relatively weak assumptions about investors' preferences and do not require the specification of a full-blown asset pricing theory, they do provide useful restrictions on factor model estimates. This is shown by imposing these restrictions in the estimation of various multifactor models that allow for a non-zero price of coskewness risk. Empirically, while coskewness explains cross-sectional variation in average excess returns not explained by the Fama and French (1996) factors, its price is of a much more modest magnitude than in unrestricted estimates.
Book Synopsis Robust Aggregate Implications of Stochastic Discount Factor Volatility by : Casey B. Mulligan
Download or read book Robust Aggregate Implications of Stochastic Discount Factor Volatility written by Casey B. Mulligan and published by . This book was released on 2004 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: The stochastic discount factor seems volatile, but is this observation of any consequence for aggregate analysis of consumption, capital accumulation, output, etc.? I amend the standard frictionless model of aggregate consumption and capital accumulation with time-varying subjective probability adjustments, and obtain four implications for aggregate economic analysis. First, subjective probability adjustments add volatility to the stochastic discount factor, and can rationalize any pattern of asset prices satisfying no-arbitrage, even while capital accumulation is efficient. Second, despite its flexibility in pricing assets, the model implies that, in expected value, the intertemporal marginal rate of transformation is equal to the intertemporal marginal rate of substitution, and there is a simple, stable, and familiar relation between consumption growth and capital's return. Third, the expected returns on assets in small net aggregate supply are weakly (and sometimes negatively) correlated with capital's expected return, and are thereby poor predictors of aggregate consumption growth. Fourth, when it comes to assets in small net aggregate supply, capital gains reflect time varying risk premia, and returns can predict aggregate consumption growth better when the capital gain component of those returns is ignored. All four implications are consistent with empirical results reported here, and in the previous literature documenting stochastic discount factor volatility. Several recent theories of stochastic discount factor volatility can, from the aggregate point of view, be interpreted as special cases of subjective probability adjusted CCAPM.
Book Synopsis Identification and Inference in Linear Stochastic Discount Factor Models with Excess Returns by : Craig Burnside
Download or read book Identification and Inference in Linear Stochastic Discount Factor Models with Excess Returns written by Craig Burnside and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: When excess returns are used to estimate linear stochastic discount factor (SDF) models, researchers often adopt a normalization of the SDF that sets its mean to 1, or one that sets its intercept to 1. These normalizations are often treated as equivalent, but they are subtly different both in population, and in finite samples. Standard asymptotic inference relies on rank conditions that differ across the two normalizations, and which can fail to differing degrees. I first establish that failure of the rank conditions is a genuine concern for many well known SDF models in the literature. I also describe how failure of the rank conditions can affect inference, both in population and in finite samples. I propose using tests of the rank conditions not only as a diagnostic device, but also for model reduction. I show that this model reduction procedure has desirable size and power properties in a Monte Carlo experiment with a calibrated model.
Book Synopsis Estimating the Stochastic Discount Factor Without a Utility Function by : Fabio Araujo
Download or read book Estimating the Stochastic Discount Factor Without a Utility Function written by Fabio Araujo and published by . This book was released on 2005 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The New Palgrave Dictionary of Economics by :
Download or read book The New Palgrave Dictionary of Economics written by and published by Springer. This book was released on 2016-05-18 with total page 7493 pages. Available in PDF, EPUB and Kindle. Book excerpt: The award-winning The New Palgrave Dictionary of Economics, 2nd edition is now available as a dynamic online resource. Consisting of over 1,900 articles written by leading figures in the field including Nobel prize winners, this is the definitive scholarly reference work for a new generation of economists. Regularly updated! This product is a subscription based product.