An Empirical Study Of A Conditional International Asset Pricing Model For Us Japanese And European Stock And Government Bond Markets
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An Empirical Study Of A Conditional International Asset Pricing Model For Us Japanese And European Stock And Government Bond Markets
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Author : Tom Arild Fearnley
language : en
Publisher:
Release Date : 2002
An Empirical Study Of A Conditional International Asset Pricing Model For Us Japanese And European Stock And Government Bond Markets written by Tom Arild Fearnley and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with categories.
The dissertation consists of three papers dedicated to empirical tests of a multivariate conditional international Capital Asset Pricing Model (CAPM). The aim is to evaluate to what extent such a model can explain stock and government bond returns in the US, Japan and Europe over the last 10 to 15 years, and whether the model can be usefully employed in global tactical asset allocation. The starting point is the international CAPM of Adler and Dumas (1983), which is made conditional through a multivariate GARCH-in-mean specification. The additional assumption that local inflation rates are zero or deterministic reduces inflation risk premia to currency risk premia. Data are analyzed at weekly frequency. The first paper introduces regime switching GARCH parameters. The second paper adds government bonds to the analysis, and evaluates four different models for the price of market risk. The third paper introduces regime switching prices of risk and intercept terms.
Estimation Of An International Capital Asset Pricing Model With Stocks And Government Bonds
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Author : Tom Arild Fearnley
language : en
Publisher:
Release Date : 2004
Estimation Of An International Capital Asset Pricing Model With Stocks And Government Bonds written by Tom Arild Fearnley and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.
The paper investigates whether US, Japanese and European stock and government bond return indices are jointly priced within a conditional multivariate form of the international Capital asset Pricing Model during the period 1993-2001. It also explores the time variation of the price of market risk within this framework, allowing for a structural change in the prices of market and currency risk. The corresponding conditional optimal portfolio weights are compared with the observed market capitalization weights of the assets. The agreement is found to be better for the stock markets than for the bond markets. Finally, out-of-sample performance of the conditional optimal portfolio is measured relative to the market portfolio of stocks and bonds.
Tests Of An International Capital Asset Pricing Model With Stocks And Government Bonds And Regime Switching Prices Of Risk And Intercepts
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Author : Tom Arild Fearnley
language : en
Publisher:
Release Date : 2004
Tests Of An International Capital Asset Pricing Model With Stocks And Government Bonds And Regime Switching Prices Of Risk And Intercepts written by Tom Arild Fearnley and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.
The paper tests a conditional multivariate International Capital Asset Pricing Model for US, Japanese and European stocks and government bonds, covering the period 1993-2001. Time variation in the prices of market and currency risk is modelled by means of synchronous regime switching. The paper also explores the statistical significance and time variation of asset specific intercept terms, again using synchronous regime switching. The prices of risk are found to be highly time varying. The price of market risk is statistically significant, and the international CAPM risk premia are validated, although currency risk premia are not statistically significant. However, the intercept terms are typically large and significant, implying an overall rejection of the international CAPM, and suggesting that additional, unidentified pricing factors contribute to return expectations.
The World Price Of Foreign Exchange Risk
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Author : Bernard Dumas
language : en
Publisher:
Release Date : 1993
The World Price Of Foreign Exchange Risk written by Bernard Dumas and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with Capital assets pricing model categories.
We consider a world capital market in which the investor population is heterogenous. Investors of different countries differ in the prices of goods at which they consume the income from their investments. In such a setting, the international CAPM incorporates rewards for exchange rate risk, in addition to the traditional reward for market-covariance risk. The aim of the paper is to determine whether these additional risk premia empirically playa significant role in the pricing of securities. The test being conducted is a test of a conditional version of the CAPM. It builds on the recent empirical literature which points out that stock market returns may, to some extent, be predicted on the basis of a number of instrumental variables, such as interest rates and dividend yields. All previous tests of the international CAPM with exchange risk premia have been tests of the unconditional version and have been inconclusive.
Three Essays On International Stock And Bond Markets
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Author : DongJoon Jeong
language : en
Publisher:
Release Date : 1993
Three Essays On International Stock And Bond Markets written by DongJoon Jeong and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with categories.
Coupon Effects And The Pricing Of Japanese Government Bonds
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Author : Young Ho Eom
language : en
Publisher:
Release Date : 1998
Coupon Effects And The Pricing Of Japanese Government Bonds written by Young Ho Eom and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with Bonds categories.
Essays On Empirical Asset Pricing
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Author : Xiang Zhang
language : en
Publisher:
Release Date : 2013
Essays On Empirical Asset Pricing written by Xiang Zhang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
This thesis consists of three essays on empirical asset pricing around three themes: evaluating linear factor asset pricing models by comparing their misspecified measures, understanding the long-run risk on consumption-leisure to investigate their pricing performances on cross-sectional returns, and evaluating conditional asset pricing models by using the methodology of dynamic cross-sectional regressions. The first chapter is ̀̀Comparing Asset Pricing Models: What does the Hansen-Jagannathan Distance Tell Us?''. It compares the relative performance of some important linear asset pricing models based on the Hansen-Jagannathan (HJ) distance using data over a long sample period from 1952-2011 based on U.S. market. The main results are as follows: first, among return-based linear models, the Fama-French (1993) five-factor model performs best in terms of the normalized pricing errors, compared with the other candidates. On the other hand, the macro-factor model of Chen, Roll, and Ross (1986) five-factor is not able to explain industry portfolios: its performance is even worse than that of the classical CAPM. Second, the Yogo (2006) non-durable and durable consumption model is the least misspecified, among consumption-based asset pricing models, in capturing the spread in industry and size portfolios. Third, the Lettau and Ludvigson (2002) scaled consumption-based CAPM (C-CAPM) model obtains the smallest normalized pricing errors pricing gross and excess returns on size portfolios, respectively, while Santos and Veronesi (2006) scaled C-CAPM model does better in explain the return spread on portfolios of U.S. government bonds. The second chapter (̀̀Leisure, Consumption and Long Run Risk: An Empirical Evaluation'') uses a long-run risk model with non-separable leisure and consumption, and studies its ability to price equity returns on a variety of portfolios of U.S. stocks using data from 1948-2011. It builds on early work by Eichenbaum et al. (1988) that explores the empirical properties of intertemporal asset pricing models where the representative agent has utility over consumption and leisure. Here we use the framework in Uhlig (2007) that allows for a stochastic discount factor with news about long-run growth in consumption and leisure. To evaluate our long-run model, we assess its performance relative to standard asset pricing models in explaining the cross-section of returns across size, industry and value-growth portfolios. We find that the long-run consumption-leisure model cannot be rejected by the J-statistic and it does better than the standard C-CAPM, the Yogo durable consumption and Fama-French three-factor models. We also rank the normalized pricing errors using the HJ distance: our model has a smaller HJ distance than other candidate models. Our paper is the first, as far as we are aware, to use leisure data with adjusted working hours as a measure of leisure i.e., defined as the difference between a fixed time endowment and the observable hours spent on working, home production, schooling, communication, and personal care (Yang (2010)). The third essay: ̀̀Empirical Evaluation of Conditional Asset Pricing Models: An Economic Perspective'' uses dynamic Fama-MacBeth cross-sectional regressions and tests the performance of several important conditional asset pricing models when allowing for time-varying price of risk. It compares the performance of conditional asset pricing models, in terms of their ability to explain the cross-section of returns across momentum, industry, value-growth and government bond portfolios. We use the new methodology introduced by Adrian et al. (2012). Our main results are as follows: first we find that the Lettau and Ludvigson (2001) conditional model does better than other models in explaining the cross-section of momentum and value-growth portfolios. Second we find that the Piazessi et al. (2007) consumption model does better than others in pricing the cross-section of industry portfolios. Finally, we find that in the case of the cross-section of risk premia on U.S. government bond portfolios the conditional model in Santos and Veronesi (2006) outperforms other candidate models. Overall, however, the Lettau and Ludvigson (2001) model does better than other candidate models. Our main contributions here is using a recently developed method of dynamic Fama-MacBeth regressions to evaluate the performance of leading conditional CAPM (C-CAPM) models in a common set of test assets over the time period from 1951-2012.
Conditional Asset Pricing In International Equity Markets
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Author : Thanh Huynh
language : en
Publisher:
Release Date : 2017
Conditional Asset Pricing In International Equity Markets written by Thanh Huynh and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
This paper tests conditional asset pricing models in international markets on value, momentum, and the COMBO anomaly of Asness, Moskowitz, and Pedersen (2013) (AMP). We find that incorporating instruments to capture the time variation in risk exposure can significantly reduce the bias in unconditional alpha documented in recent international studies. Particularly, employing the instrumental variables regression approach of Boguth, Carlson, Fisher, and Simutin (2011) to estimate the conditional Fama-French model can successfully explain returns on COMBO portfolios in North America, Europe, Japan, and the global market. Furthermore, instrumenting the global Fama-French model with lagged component betas can reduce the unconditional AMP's 50-50 COMBO alpha by 11%-72%, pointing to the efficacy of this instrumental variable in international markets. Our findings have important implications for international asset pricing theory.
Tests Of Capm On An International Portfolio Of Bonds And Stocks
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Author : Charles Engel
language : en
Publisher:
Release Date : 1993
Tests Of Capm On An International Portfolio Of Bonds And Stocks written by Charles Engel and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with Bonds categories.
This paper estimates and tests an international version of the Capital Asset Pricing Model. Investors from the U.S., Germany and Japan choose a portfolio that includes bonds and equities from each of these countries to maximize a function of the mean and variance of returns. Investors in each country evaluate returns in terms of their home currency. The CAPM does have some power in explaining ex ante returns. It predicts fairly large risk premia on the equities, but small ones on bonds. The model is rejected, however, when tested against a more general alternative that allows for more investor heterogeneity than the CAPM.
International Linkages Of Japanese Bond Markets
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Author : Hongfang Zhang
language : en
Publisher:
Release Date : 2014
International Linkages Of Japanese Bond Markets written by Hongfang Zhang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
This paper examines the dynamic patterns of international linkages of the Japanese government bond yields with government bond yields in the US, the UK and Germany during the period from January 1980 to December 2004. Applying the vector autoregression (VAR) model and the vector error correction (VEC) model to monthly observations of nominal bond yields and exchange rate-adjusted bond yields over the 25-year period, this paper provides consistent empirical evidence that the Japanese bond market is independent of other major national bond markets, but it exerts some influence in determining bond yields in bond markets in other major industrial countries. However, since the early 1990, evidence shows that the independence of the Japanese bond market has increased further, while its leading role in global bond markets has been eroded significantly.
