Time Series And Cross Section Variation Of Bond Risk Premia
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Time Series And Cross Section Variation Of Bond Risk Premia
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Author : Niloofar Sahebalzamany
language : en
Publisher:
Release Date : 2018
Time Series And Cross Section Variation Of Bond Risk Premia written by Niloofar Sahebalzamany 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.
The Cross Section And Time Series Of Stock And Bond Returns
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Author : Stefan Dercon
language : en
Publisher:
Release Date : 2012
The Cross Section And Time Series Of Stock And Bond Returns written by Stefan Dercon and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with Bonds categories.
Value stocks have higher exposure to innovations in the nominal bond risk premium than growth stocks. Since the nominal bond risk premium measures cyclical variation in the market's assessment of future output growth, this results in a value risk premium provided that good news about future output lowers the marginal utility of wealth today. In support of this mechanism, we provide new historical evidence that low return realizations on value minus growth, typically at the start of recessions when nominal bond risk premia are low and declining, are associated with lower future dividend growth rates on value minus growth and with lower future output growth. Motivated by this connection between the time series of nominal bond returns and the cross-section of equity returns, we propose a parsimonious three-factor model that jointly prices the cross-section of returns on portfolios of stocks sorted on book-to-market dimension, the cross-section of government bonds sorted by maturity, and time series variation in expected bond returns. Finally, a structural dynamic asset pricing model with the business cycle as a central state variable is quantitatively consistent with the observed value, equity, and nominal bond risk premia.
The Cross Section And Time Series Of Stock And Bond Returns
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Author : Ralph S. J. Koijen
language : en
Publisher:
Release Date : 2014
The Cross Section And Time Series Of Stock And Bond Returns written by Ralph S. J. Koijen 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.
Low realizations of the bond factors, typically at the onset of recessions, coincide with low value-minus-growth returns, low future dividend growth on value-minus-growth, and low future economic growth. This evidence supports the view that the business cycle is a priced state variable in stock markets. Because of this new nexus between stock and bond markets, a parsimonious three-factor model can be used to jointly price the book-to-market stock and maturity-sorted bond portfolios and reproduce the time-series variation in expected bond returns. Structural dynamic asset pricing models need to include a central role for the business cycle as a priced state variable to be quantitatively consistent with the observed value, equity, and bond risk premia.
Time Varying Risk Premia In Corporate Bond Markets
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Author : Redouane Elkamhi
language : en
Publisher:
Release Date : 2008
Time Varying Risk Premia In Corporate Bond Markets written by Redouane Elkamhi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
We study the link between corporate bond risk premia and equity returns in a large panel of corporate bond transaction data. In contrast to previous work, we find that a significant part of the time variation in bond risk premia can be explained by equity implied bond risk premium estimates. We also document a large time variation in the expected loss component of bond spreads. This component is related to total asset volatility, whereas the risk premium is related to systematic volatility. In addition, we show by means of linear regressions that augmenting the set of variables predicted by typical structural models with equity-implied bond default risk premia significantly increases explanatory power.
Portfolio Selection And Asset Pricing
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Author : Shouyang Wang
language : en
Publisher: Springer Science & Business Media
Release Date : 2012-12-06
Portfolio Selection And Asset Pricing written by Shouyang Wang 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 2012-12-06 with Business & Economics categories.
In our daily life, almost every family owns a portfolio of assets. This portfolio could contain real assets such as a car, or a house, as well as financial assets such as stocks, bonds or futures. Portfolio theory deals with how to form a satisfied portfolio among an enormous number of assets. Originally proposed by H. Markowtiz in 1952, the mean-variance methodology for portfolio optimization has been central to the research activities in this area and has served as a basis for the development of modem financial theory during the past four decades. Follow-on work with this approach has born much fruit for this field of study. Among all those research fruits, the most important is the capital asset pricing model (CAPM) proposed by Sharpe in 1964. This model greatly simplifies the input for portfolio selection and makes the mean-variance methodology into a practical application. Consequently, lots of models were proposed to price the capital assets. In this book, some of the most important progresses in portfolio theory are surveyed and a few new models for portfolio selection are presented. Models for asset pricing are illustrated and the empirical tests of CAPM for China's stock markets are made. The first chapter surveys ideas and principles of modeling the investment decision process of economic agents. It starts with the Markowitz criteria of formulating return and risk as mean and variance and then looks into other related criteria which are based on probability assumptions on future prices of securities.
Risk Premia In The Term Structure Of Interest Rates
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Author : Dennis Bams
language : en
Publisher:
Release Date : 2000
Risk Premia In The Term Structure Of Interest Rates written by Dennis Bams and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Interest rate risk categories.
International Bond Risk Premia
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Author : Magnus Dahlquist
language : en
Publisher:
Release Date : 2011
International Bond Risk Premia written by Magnus Dahlquist 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.
We identify local and global factors across international bond markets that are poorly spanned by the traditional level, slope and curvature factors but have strong forecasting power for future bond excess returns. Local and global factors are jointly significant predictors of bond returns, where the global factor is closely linked to US bond risk premia and international business cycles. Motivated by our results, we estimate a no-arbitrage affine term structure model for each country in which movements in risk premia are driven by one local and one global factor. Yield loadings for the two factors are estimated to be close to zero while shocks to risk premia account for a small fraction of yield variance. This suggests that the cross-section of yields conveys little information about the return-forecasting factors. We show that shocks to global risk premia cause off-setting movements in expected returns and expected future short-term interest rates, leaving current yields little affected. Furthermore, correlations between international bond risk premia have increased over time, indicating an increase in integration between markets. Affine model, local and global factors, time-varying risk premia
Time Series Estimation Of The Bond Default Risk Premium
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Author : Jerry L. Stevens
language : en
Publisher:
Release Date : 2001
Time Series Estimation Of The Bond Default Risk Premium written by Jerry L. Stevens and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with categories.
The bond default risk premium, measured by the spread between higher and lower grade bond returns, is often estimated with univariate time series procedures and used as an input in financial models. In this paper, time series properties of the historical default risk premium are analyzed and forecasting results from univariate time series models are compared. An autoregressive model with an overraction component provides the best statistical fit for the bond default risk premium series. A random walk model exhibits the worst fit. The findings are robust over a variety of model specifications and measure the time series process the univariate time series models explain a small percentage of the variation in the default risk premium, raising questions about traditional approaches to estimating the expected default risk premium.
Growth Or Glamour
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Author : John Y. Campbell
language : en
Publisher:
Release Date : 2005
Growth Or Glamour written by John Y. Campbell and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with Stocks categories.
The cash flows of growth stocks are particularly sensitive to temporary movements in aggregate stock prices (driven by movements in the equity risk premium), while the cash flows of value stocks are particularly sensitive to permanent movements in aggregate stock prices (driven by market-wide shocks to cash flows.) Thus the high betas of growth stocks with the market's discount-rate shocks, and of value stocks with the market's cash-flow shocks, are determined by the cash-flow fundamentals of growth and value companies. Growth stocks are not merely "glamour stocks" whose systematic risks are purely driven by investor sentiment. More generally, accounting measures of firm-level risk have predictive power for firms' betas with market-wide cash flows, and this predictive power arises from the behavior of firms' cash flows. The systematic risks of stocks with similar accounting characteristics are primarily driven by the systematic risks of their fundamentals.
Valuation Differences Between Credit Default Swap And Corporate Bond Markets
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Author : Oliver Entrop
language : en
Publisher:
Release Date : 2014
Valuation Differences Between Credit Default Swap And Corporate Bond Markets written by Oliver Entrop 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 quantifies and explains valuation differences between credit default swaps and corporate bonds from a sample of European investment-grade firms. Based on all information gained through the calibration of a stochastic intensity credit model to the time series of the issuer's CDS curve, we define a new corporate bond-specific measure for the valuation difference. Our results show that, on average, risk premia implied in corporate bonds exceed those in CDS markets by a much smaller extent than found in previous studies. Using panel data analysis we detect among others a cross-sectional influence of bond liquidity measures and find a significant impact of the general level of credit risk on the time series variation of the valuation difference.