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Author : Federico Gavazzoni
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (144 download)
Download or read book Essays on Asset Pricing Puzzles written by Federico Gavazzoni and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Stan Hurn
Publisher :
ISBN 13 :
Total Pages : 128 pages
Book Rating : 4.:/5 (255 download)
Download or read book Special Issue: Asset Pricing Puzzles in Finance written by Stan Hurn and published by . This book was released on 2006 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Ravi Bansal
Publisher :
ISBN 13 :
Total Pages : 42 pages
Book Rating : 4.:/5 (644 download)
Download or read book Risk for the Long Run written by Ravi Bansal and published by . This book was released on 2001 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Garrett Henry TeSelle
Publisher :
ISBN 13 :
Total Pages : 412 pages
Book Rating : 4.:/5 (319 download)
Download or read book Econometric Issues in Asset Pricing Puzzles written by Garrett Henry TeSelle and published by . This book was released on 1996 with total page 412 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Joshua V. Rosenberg
Publisher :
ISBN 13 :
Total Pages : 51 pages
Book Rating : 4.:/5 (129 download)
Download or read book Asset Pricing Puzzles written by Joshua V. Rosenberg and published by . This book was released on 2008 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes and implements a consumption-based pricing kernel (stochastic discount factor) testingmethodology that focuses on the covariance between the pricing kernel and asset squared excess returns. This covariance has an intuitive economic interpretation as a risk-neutral variance risk-premium, i.e. the difference between the risk-neutral return variance and the objective return variance. In the same way that an asset riskpremium puzzle is due to a failure of the pricing kernel to adequately covary with asset excess returns, a riskneutralvariance puzzle is due to a failure of the pricing kernel to adequately covary with asset squared excess returns. This paper tests a consumption-based pricing kernel specification that is compatible with habit formation, consumption durability, and constant relative risk-aversion over a range of plausible preference parametervalues. The difference between consumption-based and semi-parametric option-based estimates of unconditional risk-neutral Samp;P500 return variance is used as a pricing kernel specification test statistic.Evidence is found of a risk-neutral Samp;P500 return variance puzzle if constant relative risk-aversion is assumed. The puzzle is resolved when the pricing kernel is allowed to exhibit habit formation. The acceptablehabit pricing kernels exhibit higher habit levels, higher utility function concavity, and lower rates of timepreferencethan estimates in related papers. When the full history of consumption data is used, the preference parameter estimates are more similar to those of related papers.
Author : John H. Cochrane
Publisher : Princeton University Press
ISBN 13 : 1400829135
Total Pages : 560 pages
Book Rating : 4.4/5 (8 download)
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.
Author : Ravi Bansal
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (133 download)
Download or read book Risks for the Long Ruin : a Potential Resolution of Asset Pricing Puzzles written by Ravi Bansal and published by . This book was released on 2000 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Xiao Chen
Publisher :
ISBN 13 :
Total Pages : 63 pages
Book Rating : 4.:/5 (13 download)
Download or read book Asset Pricing Puzzles and Price-Impact written by Xiao Chen and published by . This book was released on 2020 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: We solve in closed-form a continuous-time Nash equilibrium model in which a finite number of exponential investors continuously consume and trade strategically with price-impact. Compared to the analogous Pareto-efficient equilibrium model, price-impact has an amplification effect on risk-sharing distortions that helps resolve the interest rate puzzle and the stock-price volatility puzzle. However, price impact has little effect on the equity premium puzzle.
Author : Doron Avramov
Publisher :
ISBN 13 :
Total Pages : 71 pages
Book Rating : 4.:/5 (129 download)
Download or read book Cross-Sectional Asset Pricing Puzzles written by Doron Avramov and published by . This book was released on 2011 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes an intertemporal asset pricing model within a long-run risk economy featuring a formal cross section of firms characterized by mean-reverting expected dividend growth. We find considerable empirical support for the cross-sectional implications of the model, as cash flow- and return-based measures of long-run risk exposure are both positively related to returns and offer a partial explanation of the size, value, and momentum anomalies. Interestingly, the model implies a negative relation between exposures to systematic and firm-specific risks in the cross section. Higher cash-flow duration firms exhibit higher exposure to economic growth shocks while they are less sensitive to firm-specific news. Such firms command higher risk premiums but exhibit lower analyst forecast dispersion, idiosyncratic volatility, and distress risk. We find theoretical and empirical support of a long-run risk explanation of these anomalies.
Author : Claus Munk
Publisher : Oxford University Press, USA
ISBN 13 : 0199585490
Total Pages : 598 pages
Book Rating : 4.1/5 (995 download)
Download or read book Financial Asset Pricing Theory written by Claus Munk and published by Oxford University Press, USA. This book was released on 2013-04-18 with total page 598 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book presents models for the pricing of financial assets such as stocks, bonds, and options. The models are formulated and analyzed using concepts and techniques from mathematics and probability theory. It presents important classic models and some recent 'state-of-the-art' models that outperform the classics.
Author : Xian Yang
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (133 download)
Download or read book An Investigation of Asset Pricing Puzzles with Cyclical Risk Aversion and Intertemporal Substitution written by Xian Yang and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Representative agent models that embed the Lucas-Breeden (Lucas (1978), Breeden (1979)) paradigm for explaining asset return differentials are generally regarded as inconsistent with the empirical data. Difficulties such as the equity premium puzzle (Mehra and Prescott (1985)), the risk free rate puzzle (Weil (1989)), etc., are well documented and it has been shown that these puzzles are very robust (Kocherlakota (1996), Campbell (1996) and Cochrane (1997) provide good surveys). Recently, however, several authors (Campbell and Cochrane (1999), Gordon and St. Amour (2000, 2001) and Bakshi and Chen (1996) are some examples) have pointed to time-varying risk aversion as a potential source of mis-specification that may account for these puzzles. However, risk aversion and intertemporal substitution are intertwined in these models, just as they are in the additive expected utility model, therefore it is impossible to interpret unambiguously which feature of preferences varies over the cycle. The preferences suggested by Epstein and Zin (1989) can separate the coefficient of relative risk aversion ('CRRA') from the elasticity of intertemporal substitution ('EIS') and allow average consumption growth to have a much smaller effect than consumption volatility on the risk free interest rate. This paper generalizes the model of Epstein and Zin (1989) by allowing the representative agent to display countercyclical risk aversion and assesses if such behavior can add to the explanation of various empirical phenomena that have been investigated in finance and macroeconomics, such as the Mehra and Prescott (1985) equity premium puzzle. I investigate various combinations of state dependent 'CRRA' with state dependent 'EIS'. In the case of constant ' EIS' and time varying 'CRRA', my results look very similar to those generated without state dependence. However, I also investigate the same model but with time varying 'EIS' and constant ' CRRA'. I find that a time varying 'EIS' provides delightful results. I also find that time varying 'EIS' combined with a time varying 'CRRA' leads to even better results. As a further check, I use my calibrated preference parameters to predict the long-term interest rate. The calibrated preference parameters lead to very sensible term structure predictions. I also investigate a similar problem in an open economy. Based on a two-country general equilibrium model, I investigate the asset pricing puzzles from a different angle; i.e. an analysis of the predictability of excess rates of return on discount bonds, equities and foreign money markets using regression analysis. My work in an open economy setting basically supports Bekaert, Hodrick and David (1997) conclusion. I find that when I introduce both time varying ' EIS' and 'CRRA' into my two country model, the improved predictability of excess returns is insignificant. My results uphold a stronger statement: incorporating first order risk aversion with a simple pattern for time varying risk aversion and intertemporal substitution does not help much either. But my findings do not rule out the possibility that there could exist a richer pattern of time varying [rho] and à such that the estimated ßs can match the stylized results.
Author : Chris I. Telmer
Publisher : Kingston, Ont. : Institute for Economic Research, Queen's University
ISBN 13 :
Total Pages : 42 pages
Book Rating : 4.:/5 (262 download)
Download or read book Asset Pricing Puzzles and Incomplete Markets written by Chris I. Telmer and published by Kingston, Ont. : Institute for Economic Research, Queen's University. This book was released on 1991 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Ravi Bansal
Publisher :
ISBN 13 :
Total Pages : 43 pages
Book Rating : 4.:/5 (129 download)
Download or read book Risks for the Long Run written by Ravi Bansal and published by . This book was released on 2010 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We model dividend and consumption growth rates as containing a small long-run predictable component and economic uncertainty (i.e., growth rate volatility) as being time-varying. The magnitudes of the predictable variation and changing volatility in growth rates, as in the data, are quite small. These growth rate dynamics, for which we provide empirical support, in conjunction with plausible parameter configurations of the Epstein and Zin (1989) preferences can explain key observed asset markets phenomena. In particular, we show that the model can justify the observed equity premium, the low risk free rate, and the ex-post volatilities of the market return, real risk free rate, and the price-dividend ratio. As in the data, the model also implies that dividend yields predict returns and that market return volatility is stochastic. The main economic insight we capture is that news about growth rates significantly alter agent's perceptions regarding long run expected growth rates and growth rate uncertainty--in equilibrium, this leads to a large equity risk premium, low risk free interest rate, and large market volatility.
Author : Gurdip Bakshi
Publisher :
ISBN 13 :
Total Pages : 37 pages
Book Rating : 4.:/5 (129 download)
Download or read book Do Subjective Expectations Explain Asset Pricing Puzzles? written by Gurdip Bakshi and published by . This book was released on 2012 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: The structural uncertainty model with Bayesian learning, advanced by Weitzman (AER 2007), provides a framework for gauging the effect of structural uncertainty on asset prices and risk premiums. This paper provides an operational version of this approach that incorporates realistic priors about consumption growth volatility, while guaranteeing finite asset pricing quantities. In contrast to the extant literature, the resulting asset pricing model with subjective expectations yields well-defined expected utility, finite moment generating function of consumption growth, and tractable expressions for equity premium and riskfree return. Our quantitative analysis reveals that explaining the historical equity premium and riskfree return, in the context of subjective expectations, requires implausible levels of structural uncertainty. Furthermore, these implausible prior beliefs result in consumption disaster probabilities that virtually coincide with those implied by more realistic priors. At the same time, the two sets of prior beliefs have diametrically opposite asset pricing implications: one asserting, and the other contradicting, the antipuzzle view.
Author : Rajnish Mehra
Publisher : Now Publishers Inc
ISBN 13 : 1601980647
Total Pages : 97 pages
Book Rating : 4.6/5 (19 download)
Download or read book The Equity Premium Puzzle written by Rajnish Mehra and published by Now Publishers Inc. This book was released on 2007-09-27 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over two decades ago, Mehra and Prescott (1985) challenged the finance profession with a poser: the historical US equity premium is an order of magnitude greater than can be rationalized in the context of the standard neoclassical paradigm of financial economics. This regularity, dubbed "the equity premium puzzle," has spawned a plethora of research efforts to explain it away. In this review, the author takes a retrospective look at the original paper and explains the conclusion that the equity premium is not a premium for bearing non-diversifiable risk
Download or read book Essays on Consumption and Asset Pricing Puzzles written by and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contributes to the literature on the consumption-portfolio choice under uncertainty and is motivated by several empirical failures of the standard consumption-based capital asset pricing model (CCAPM). This canonical model has proven disappointing empirically and has even been questioned whether it is theoretically valuable and practically useful even if it is in some sense the only model we have. The frustration is due to that the model performs no better in practice and generates some well-known consumption puzzles and asset pricing puzzles. The purpose of the thesis is to reexamine these puzzles and then to resolve them. After the debate of Hansen and Singleton (1983) and Hall (1988), the estimates of the elasticity of intertemporal substitution (EIS) of consumption in a representative agent model have not resulted in any consensus. Based on this observation, the first chapter of this thesis is focused on resolving the elasticity puzzle or the unresponsiveness to interest rates. We propose a new theoretical and empirical perspective on the relationship between consumption growth and asset returns. In the spirit of Hansen and Singleton (1983), we demonstrate that observed growth rate of consumption responds not only to a specific asset return but also to other asset returns. Empirically, US postwar quarterly data are used to fit the regression model derived in the chapter, and the sample period is 1953Q2-2001Q2. Empirical results show that the EIS is greater than 0.1, the maximum value considered possible by Hall (1988). Accordingly, we argue that there is no elasticity puzzle in the standard representative agent model. The second chapter provides an explanation for the puzzle of excess sensitivity of consumption to expected income proposed by Flavin (1981). We exploit consumer's superior information (i.e., windfalls in investments and in income) to integrate the consumption Euler equations into a generalized Euler equation. The implications emerging f.
Author : Gurdip Bakshi
Publisher :
ISBN 13 :
Total Pages : 42 pages
Book Rating : 4.:/5 (129 download)
Download or read book Do Subjective Expectations Explain Asset Pricing Puzzles? written by Gurdip Bakshi and published by . This book was released on 2009 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: The structural uncertainty model with Bayesian learning, advanced by Weitzman (AER 2007), provides a framework for gauging the effect of structural uncertainty on asset prices and risk premiums. This paper provides an operational version of this approach that incorporates realistic priors about consumption growth volatility, while guaranteeing finite asset pricing quantities. In contrast to the extant literature, the resulting asset pricing model with subjective expectations yields well-defined expected utility, finite moment generating function of consumption growth, and tractable expressions for equity premium and riskfree return. Our quantitative analysis reveals that explaining the historical equity premium and riskfree return, in the context of subjective expectations, requires implausible levels of structural uncertainty. Furthermore, these implausible prior beliefs result in consumption disaster probabilities that virtually coincide with those implied by more realistic priors. At the same time, the two sets of prior beliefs have diametrically opposite asset pricing implications: one asserting, and the other contradicting, the antipuzzle view.
