Essays On Productivity Risks In Asset Pricing
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Essays On Productivity Risks In Asset Pricing
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Author : Nam Gang Lee
language : en
Publisher:
Release Date : 2018
Essays On Productivity Risks In Asset Pricing written by Nam Gang Lee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with Business cycles categories.
This dissertation analyzes the effect of productivity risk on economic fluctuations and asset prices in a production economy. My analysis is based on the direct estimation of various specifications regarding productivity, a key driver of fluctuations in macro quantities and asset prices, and seeks to avoid being the error of reverse-engineering the exogenous productivity process to match asset-pricing data.
Essays On Asset Pricing
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Author : Bosung Jang
language : en
Publisher:
Release Date : 2017
Essays On Asset Pricing written by Bosung Jang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with Assets (Accounting) categories.
This dissertation studies how asset prices are related to various macroeconomic and financial factors. In the first chapter, I examine the influence of external financing costs on growth and asset prices. Using U.S. high-tech firm data and the aggregate financing cost measure of Eisfeldt and Muir (2016), I find that an increase in financing cost can have negative effects on R&D by reducing equity finance. This result suggests that financing cost can have substantial impacts on long-run productivity through the R&D channel. Motivated by this idea, I construct a general equilibrium model where financing costs affect innovation activities and future productivity. My model endogenously generates long-run risk and matches key features of macroeconomic and asset price data. The model produces a sizable equity premium, doing a good job of matching macro moments in the data. Furthermore, a large risk premium of R&D-intensive stocks is justified in the model as in the data. In addition, as a higher financing cost forecasts lower productivity growth in the model, this prediction is supported by empirical evidence. In the second chapter, I investigate whether heterogeneity between domestic and foreign households can help explain the cross-section of stock returns. For this analysis, I apply Yogo’s (2006) durable consumption model to a two-country setting using Korean stock market data. In Korea, U.S. investors have been a dominant foreign investor group, given that the total share of foreigners is considerably large. By incorporating the stochastic discount factor of the U.S. into the model, I find that it plays a significant role in pricing assets. In particular, our model is successful in accounting for the expected excess return of relatively high book-to-market equity groups, producing lower pricing errors than the Fama-French 3 factor model. In the third chapter, I study the effects of debt maturity choice on stock returns and financial structure. I construct a model where firms can issue both short-term and long-term bonds, subject to collateral constraints. I also assume that, when they run financial deficits, firms use equity finance paying issuance costs. The model performs well in matching empirical facts about stock returns and the financial structure of firms. In addition, the model provides an interesting implication that firms substitute between leverage and maturity. In the literature, theoretical explanations for the substitution relationship have been mainly based on conflicts between stakeholders. Without hinging on the contract-theoretic approach, my model replicates the theoretical prediction.
Essays In Technology Diffusion And Asset Pricing
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Author : Ziemowit Konrad Bednarek
language : en
Publisher:
Release Date : 2010
Essays In Technology Diffusion And Asset Pricing written by Ziemowit Konrad Bednarek and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
First chapter of this thesis finds a new consumption growth predictor linked to macroeconomic fundamentals: the technology gap, the dierence between potential and actual productivity of capital. I construct a representative firm business cycle model, in which the technology gap generates specic patterns of short- and long-run consumption growth, and consumption growth volatility. Intuitively, a high technology gap acts as an economic shock that increases consumption in the long term due to a higher future productivity level. I use quality-adjusted price indices of durable investment goods to create a proxy for the technology gap. Consistent with the model, I find empirical evidence that a high technology gap predicts: (i) strong consumption growth at longer horizons, (ii) high consumption growth volatility, and (iii) high risk-free rate. Second chapter demonstrates the relationship between research and development expenditure, and firm productivity. I construct a model which implies that firm-level R & D optimal policy should be dependent on ex-ante productivity. Firms ex-ante further from the frontier optimally invest more in R & D. Ex-post productivity depends on the amount of R & D investment and the match between new technology and existing production factors. Firms investing more in R & D are ex-post on average closer to the frontier, controlling for theoretically motivated endogeneity. I present empirical evidence supporting the model. Using data envelopment, I construct a measure of firm-level distance from industry-wide productivity frontier. On average, a 1% larger distance from the frontier causes a 0.5% increase in R & D intensity next quarter. R & D activity in turn predicts high stock return volatility. Third chapter tests the existing durable consumption-based asset pricing model of Yogo (2006). Consumption risk is measured by the covariance between asset returns and future durable consumption growth, rather than contemporaneous growth, as in the original model. I present empirical evidence that excess returns on Fama-French portfolios are correlated more with future than contemporaneous durable consumption growth. I transform the original Euler equations of the model to use information about the future consumption growth. As its correlation with returns is higher, the estimate of risk aversion from the model decreases substantially compared with Yogo (2006). I also find that the altered consumption risk measure increases the explanatory power of the model. I approximate the original model and show that it can be estimated in the simple OLS framework. Cross-sectional R square is highest when the consumption growth is sampled over six to eight quarters ahead. This result is robust to dierent sets of test assets.
Essays On Human Capital Mobility And Asset Pricing
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Author : Andres Francisco Donangelo
language : en
Publisher:
Release Date : 2011
Essays On Human Capital Mobility And Asset Pricing written by Andres Francisco Donangelo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
This dissertation explores the intersection between labor and financial markets, in which labor mobility plays a fundamental role. Unlike physical assets such as buildings or machines, human capital can actually walk away from the firm as employees and managers switch employers. The interaction between labor mobility, firm risk and human capital has been remarkably under-researched until now. The main question of this broad project is how differences in the flexibility of workers to find employment across different industries--labor mobility--affects the owners of human and physical capital. The three parts of the dissertation look at this question from different angles. The first part, Labor Mobility and the Cross-Section of Expected Returns, focuses on the effect of labor mobility on the degree of operating leverage of a firm and thus on asset returns. I construct a dynamic model where worker's employment decisions affect the productivity of capital and asset prices in predictable ways. The model shows that reliance on a workforce with flexibility to enter and exit an industry translates into a form of operating leverage that amplifies equity-holders' exposure to productivity shocks. Consequently, firms in an industry with mobile workers have higher systematic risk loadings and higher expected asset returns. I use data from the Bureau of Labor Statistics to construct a novel measure of labor supply mobility, in line with the model, based on the composition of occupations across industries over time. I document a positive and economically significant cross-sectional relation between measures of labor mobility, operating leverage, and expected asset returns. This relation is not explained by firm characteristics known in the literature to predict expected returns. The second part, Aggregate Asset-Pricing Implications of Human Capital Mobility in General Equilibrium, extends the model in the first chapter to consider the general equilibrium implications of labor mobility. The setup is based on a multi-industry dynamic economy with production. The extended model shows that mobility of labor affects not only cash-flows, but also aggregate risk, and the equity premium. This part considers two different types of human capital. Generalist human capital can move between industries, while specialized human capital and physical capital cannot. The greater relative mobility of human capital relative to physical capital affects how aggregate risk in the economy is split between these two components of total wealth. The model shows that aggregate consumption and wealth increase when human capital is more mobile. However, at the same time, aggregate risk and the equity risk premium also increase under human capital mobility. I assume that the workforce in the economy is exogenously given in the first two chapters of this dissertation. This assumption is relaxed in the third chapter, Investments in Human Capital and Expected Asset Returns, where I endogenize the composition of occupations to discuss the interaction between human capital investments and labor mobility. This chapter focuses on the decision of workers to acquire different types of costly human capital with different degrees of associated labor mobility. This part introduces a two-sector general-equilibrium model with production and investments in human capital (i.e. education). Ex-ante identical workers face a trade-off between breadth and depth in the acquisition of industry-specific labor productivity. This chapter derives sufficient conditions for the existence of mobile workers. When these conditions are met, a fraction of workers chooses to acquire mobile but less productive generalist skills, even when labor risk can be fully hedged in financial markets.
Essays On Production Based Asset Pricing
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Author : Yifan Zhu
language : en
Publisher:
Release Date : 2022
Essays On Production Based Asset Pricing written by Yifan Zhu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with Operating leverage categories.
This dissertation consists of two essays on production-based asset pricing. The first essay studies the asset pricing implications of investment and disinvestment op- tions with a production-based model featuring costly reversibility. Investment options are contingent claims on assets in place so that they are riskier and earn higher expected re- turns. Disinvestment options with costly reversibility reduce exposure to aggregate risks amid deteriorating business conditions and lower expected returns on a firm. The inextri- cable link between investment options and disinvestment options explains the coexistence of the profitability premium and the value premium while retains a positive relation between profitability and market valuation ratios. My model also generates a procyclical profitability premium and a countercyclical value premium. In the second essay, my co-authors and I investigate the joint asset pricing effects of variable costs and fixed costs in a firm’s production process. While the latter such as SG&A expenses create an operating leverage effect, the variable costs allow firms to hedge against aggregate profitability shocks. Taking into account both types of production costs explains the empir- ical patterns in the cross-section asset returns in portfolios sorted by the gross profitability and operating leverage. Our model reconciles the seemingly contradictory phenomena that higher productivity firms earn lower returns ( ̇Imrohoro ̆glu and T ̈uzel (2014)), whereas more profitable, often more productive, firms earn higher returns (Novy-Marx (2013)). It also of- fers a novel explanation for the negative idiosyncratic volatility premium (Ang et al. (2006)) based on production costs.
Essays In Asset Pricing And The Econometrics Of Risk
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Author : Bryan T. Kelly
language : en
Publisher:
Release Date : 2010
Essays In Asset Pricing And The Econometrics Of Risk written by Bryan T. Kelly and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
Essays On Market Efficiency And Asset Pricing
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Author : Chee Tong Lee
language : en
Publisher:
Release Date : 1999
Essays On Market Efficiency And Asset Pricing written by Chee Tong Lee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with categories.
Essays On Asset Pricing Debt Valuation And Macroeconomics
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Author : Ram Sai Yamarthy
language : en
Publisher:
Release Date : 2017
Essays On Asset Pricing Debt Valuation And Macroeconomics written by Ram Sai Yamarthy 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.
My dissertation consists of three chapters which examine topics at the intersection of financial markets and macroeconomics. Two of the sections relate to the valuation of U.S. Treasury and corporate debt while the third understands the role of banking frictions on equity markets.More specifically, the first chapter asks the question, what is the role of monetary policy fluctuations for the macroeconomy and bond markets? To answer this question we design a novel asset-pricing framework which incorporates a time-varying Taylor rule for monetary policy, macroeconomic factors, and risk pricing restrictions from investor preferences. By estimating the model using U.S. term structure data, we find that monetary policy fluctuations significantly impact inflation uncertainty and bond risk exposures, but do not have a sizable effect on the first moments of macroeconomic variables. Monetary policy fluctuations contribute about 20% to the variation in bond risk premia. Models with frictions in financial contracts have been shown to create persistence effects in macroeconomic fluctuations. These persistent risks can then generate large risk premia in asset markets. Accordingly, in the second chapter, we test the ability that a particular friction, Costly State Verification (CSV), has to generate empirically plausible risk exposures in equity markets, when household investors have recursive preferences and shocks occur in the growth rate of productivity. After embedding these mechanisms into a macroeconomic model with financial intermediation, we find that the CSV friction is negligible in realistically augmenting the equity risk premium. While the friction slows the speed of capital investment, its contribution to asset markets is insignificant. The third chapter examines how firms manage debt maturity in the presence of investment opportunities. I document empirically that debt maturity tradeoffs play an important role in determining economic fluctuations and asset prices. I show at aggregate and firm levels that corporations lengthen their average maturity of debt when output and investment rates are larger. To explain these findings, I construct an economic model where firms simultaneously choose investment, short, and long-term debt. In equilibrium, long-term debt is more costly than short-term debt and is only used when investment opportunities present themselves in peaks of the business cycle.
Essays On Asset Pricing And Political Risk
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Author : Josephine Cruz Lugovskyy
language : en
Publisher:
Release Date : 2012
Essays On Asset Pricing And Political Risk written by Josephine Cruz Lugovskyy and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
Essays In Asset Pricing And Volatility Risk
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Author : Gill Segal
language : en
Publisher:
Release Date : 2016
Essays In Asset Pricing And Volatility Risk written by Gill Segal and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
In the third chapter ("From Private-Belief Formation to Aggregate-Vol Oscillation") I propose a model that relies on learning and informational asymmetry, for the endogenous amplification of the conditional volatility in macro aggregates and of cross-sectional dispersion during economic slowdowns. The model quantitatively matches the fluctuations in the conditional volatility of macroeconomic growth rates, while generating realistic real business-cycle moments. Consistently with the data, shifts in the correlation structure between firms are an important source of aggregate volatility fluctuations. Cross-firm correlations rise in downturns due to a higher weight that firms place on public information, which causes their beliefs and policies to comove more strongly.