Essays On Asset Pricing And The Horizon Effect

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Essays On Asset Pricing And The Horizon Effect

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Author : Chenglu Jin
language : en
Publisher:
Release Date : 2018

Essays On Asset Pricing And The Horizon Effect written by Chenglu Jin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with Assets (Accounting) categories.

Selected Essays In Empirical Asset Pricing

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Author : Christian Funke
language : en
Publisher: Springer Science & Business Media
Release Date : 2008-09-15

Selected Essays In Empirical Asset Pricing written by Christian Funke and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-09-15 with Business & Economics categories.

Christian Funke aims at developing a better understanding of a central asset pricing issue: the stock price discovery process in capital markets. Using U.S. capital market data, he investigates the importance of mergers and acquisitions (M&A) for stock prices and examines economic links between customer and supplier firms. The empirical investigations document return predictability and show that capital markets are not perfectly efficient.

Three Essays On The Effect Of Learning And Predictability On Optimal Dynamic Portfolio Strategies And Asset Prices

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Author : Yihong Xia
language : en
Publisher:
Release Date : 2000

Three Essays On The Effect Of Learning And Predictability On Optimal Dynamic Portfolio Strategies And Asset Prices written by Yihong Xia and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Asset allocation categories.

Essays In Asset Pricing

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Author : Anthony Sanford
language : en
Publisher:
Release Date : 2018

Essays In Asset Pricing written by Anthony Sanford and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.

This thesis has three separate goals: to provide a methodological framework for extracting risk-neutral densities from options prices, to extend the Recovery Theorem (RT) theoretically, and to apply the RT to firm decision making practices. The first chapter introduces a new model for estimating the risk-neutral density. Current estimation techniques use a single mathematical model to interpolate option prices on two dimensions: strike price and time-to-maturity (TTM). I demonstrate that, when we vary the interpolating methodology based on which dimension we are interpolating, it allows us to better extract market information. I use B-splines with at-the-money knots for the strike price interpolation and a function that depends on the option expiration horizon for the TTM interpolation. The results of this “hybrid” interpolation technique are particularly striking when compared to the common Ait-Sahalia and Lo benchmark in an application to the Recovery Theorem. My contribution is significant because it illustrates that different risk neutral density estimation techniques will reveal different market information and risk preferences. Hence, the accuracy of the density estimation is critical. In the second chapter, I redefine the prices derived in Ross's Recovery Theorem using a multivariate Markov chain rather than a univariate one. I employ a mixture transition distribution where the proposed states depend on the level of the S&P 500 index and its options' implied volatilities. I include volatility because the transition path between states depends on the propensity of an underlying asset to vary. An asset that is highly volatile is more likely to transition to a far-away state. These higher transition probabilities should lead to higher state prices. The multivariate method improves upon the univariate RT because the latter does not include the volatility inherent in the state transition, which makes its derived prices less precise. The multivariate RT produces forecast results far superior to the univariate RT. Using quarterly forecasts for the 1996-2015 period, the out-of-sample R-square of the RT increases from around 12% to 30%. Finally, in the third chapter, I answer the question: what effect does uncertainty about the aggregate economy have on investment, holding news shocks constant? Recent empirical studies have struggled to answer this question, as times of high economic uncertainty are typically also times of bad news. This chapter proposes a new methodology to measure and separate uncertainty and news shocks in stock return data. By using option prices to adjust abnormal returns for the time-varying risk premia, it is possible to estimate the impact of uncertainty shocks on firm investment while controlling for news shocks. Using quarterly data on public firms from 1996 to 2015, we find that uncertainty shocks systematically depress investment, even after controlling for bad news. Moreover, lumpy investments reinforce the negative effect of uncertainty on investment, while better management systematically attenuates this negative effect.

Three Essays On Asset Pricing Portfolio Choice And Behavioral Finance

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Author : Ehud Peleg
language : en
Publisher: ProQuest
Release Date : 2008

Three Essays On Asset Pricing Portfolio Choice And Behavioral Finance written by Ehud Peleg and has been published by ProQuest this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Capital assets pricing model categories.

Three Essays In Asset Pricing Theory

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Author : Lionel Martellini
language : en
Publisher:
Release Date : 2000

Three Essays In Asset Pricing Theory written by Lionel Martellini and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with categories.

Essays On Equilibrium Asset Pricing

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Author : Aoxiang Yang (Ph.D.)
language : en
Publisher:
Release Date : 2022

Essays On Equilibrium Asset Pricing written by Aoxiang Yang (Ph.D.) and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with categories.

My dissertation is developed to address unresolved issues in the asset pricing literature, focusing on both risk premium levels and dynamics. Chapter 1 addresses short-horizon risk premium dynamics. In the data, stock market volatility weakly or even negatively predicts short-run equity and variance risk premia, challenging positive risk-return trade-offs at the heart of leading asset pricing models. I show that a puzzling negative volatility-risk premia relationship concentrates in scattered high-uncertainty states, which occur about 20\% of the time. While at other times, the relationship is strongly positive. I develop a micro-founded learning model in which due to learning frictions investors underreact to structural breaks in high-volatility periods and overreact to transitory variance shocks in normal times. The model can successfully explain the novel time-varying volatility-risk premia relationship at short and long horizons. The model can further account for many other data features, such as a robust positive correlation between equity and variance risk premium, the leverage effect, and negative observations of equity and variance risk premia at the onsets of recessions. Chapter 2, coauthored with Professor Bjorn Eraker, focuse on equilibrium derivatives pricing. It is motivated by the observation that leading asset pricing models typically can not explain the levels or dynamics of VIX options prices. We develop a tractable equilibrium pricing model to explain observed characteristics in equity returns, VIX futures, S\&P 500 options, and VIX options data based on affine jump-diffusive state dynamics and representative agents endowed with Duffie-Epstein recursive preferences. A specific model aimed at capturing VIX options prices and other asset market data is shown to successfully replicate the salient features of consumption, dividends, and asset market data, including the first two moments of VIX futures returns, the average implied volatilities in SPX and VIX options, and first and higher-order moments of VIX options returns. In the data, we document a time variation in the shape of VIX option implied volatility and a time-varying hedging relationship between VIX and SPX options which our model both captures. Our model also matches many other asset pricing moments such as equity premia, variance risk premia, risk-free interest rates, and short-horizon return predictability. To derive our specific model, we first develop a general framework for pricing assets under recursive Duffie-Epstein preferences with IES set to one under the assumption that state variables follow affine jump diffusions, as in \citet{DPS00}. Relative to the literature, our framework has a clear marginal contribution that it is an endowment-based equilibrium model with (i) clearly stated affine state variable dynamics and (ii) precisely characterized equilibrium value function, risk-free rate, prices of risks, and risk-neutral state dynamics. We prove our state-price density is a precise $IES\to1$ limit of that approximately solved in \citet{ErakShal08}. The recursive preference assumption implies that higher-order conditional moments of the economic fundamental, such as its growth volatility and volatility-of-volatility, are explicitly priced in equilibrium. Since VIX derivatives depend on these factors, this in turn implies that the former carry non-zero risk premia.

Essays On Asset Pricing And Financial Institutions

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Author : Patrick Christian Kiefer
language : en
Publisher:
Release Date : 2018

Essays On Asset Pricing And Financial Institutions written by Patrick Christian Kiefer and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.

Forecasts of risk prices at alternative time scales can be used to consolidate history dependence in asset return time series. The resulting Markovian structure identifies a martingale component in the latent transition dynamics. I apply the model to U.S. stock markets and find the concentration of return volatility on the martingale component - the spectral gap - is countercyclical, and predicts annual market returns out-of-sample (o.o.s.) with an R-squared of 10.8%. Value (HML) predictability is concave and front-heavy, peaking at a one-year 14.7% o.o.s. R-squared. In contrast, the momentum predictability term structure is convex, insignificant on the short end, but accelerates to 31.4% o.o.s. R-squared at the three-year horizon. I form timing portfolios to investigate the risk content of the aggregate forecasts. Incremental gains from timing value are compensation for bearing systematic shocks to time-varying expected returns. Exposure to the market timing portfolio is cross-sectionally priced, while gains from timing size (SMB) are not. The findings provide new restrictions for parametric asset pricing theories. Incomplete human capital markets induce unexpected rebalancing costs that are mitigated by a bank. Ex-ante, the bank exchanges risky endowments for demandable liabilities. An ex-post withdrawal corresponds to exercising a put option on the market, used to resolve an unexpected portfolio choice problem. Portfolio choice opens a risk aversion channel that distinguishes our predictions from Diamond and Dybvig (1983) and related models. In these models, deposits resolve consumption-timing tensions by accommodating the investor's intertemporal elasticity of substitution (IES). The inclusion of risk-based incentives allow us to characterize the endogenous link between the intermediary balance sheet and the preference-based pricing kernel. Moreover, ex-post rebalancing incentives relax enforcement problems for ex-ante optimal policies in incomplete markets. This provides a justification for the coexistence of intermediation and market institutions.

Three Essays On Asset Pricing Model With Heterogenous Agents

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Author : Tae-Jin Kang
language : en
Publisher:
Release Date : 1991

Three Essays On Asset Pricing Model With Heterogenous Agents written by Tae-Jin Kang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1991 with categories.

Two Essays On Asset Pricing And Asset Choice

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Author : James Eric Gunderson
language : en
Publisher:
Release Date : 2004

Two Essays On Asset Pricing And Asset Choice written by James Eric Gunderson 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.