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Do Heterogeneous Beliefs Matter for Asset Pricing?
Juergens, Jennifer; Anderson, Evan; Ghysels, Eric - Econometric Society - 2004
We study how heterogeneous beliefs affect returns and examine whether heterogeneous beliefs are a priced factor in traditional asset pricing models. To accomplish this task, we suggest new empirical measures based on the disagreement among analysts about expected (short-term and long-term)...
Persistent link: https://www.econbiz.de/10005342284
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Liquidity Discovery and Asset Pricing
Seppi, Duane; Gallmeyer, Michael; Hollifield, Burton - Econometric Society - 2004
leads to endogenous joint dynamics for prices, trading volume, volatility, and expected returns. In particular, market …
Persistent link: https://www.econbiz.de/10005130211
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Limits of Arbitrage: Theory and Evidence from the Mortgage-Backed Securities Market
Vigneron, Olivier; Gabaix, Xavier; Krishnamurthy, Arvind - Econometric Society - 2004
``Limits of Arbitrage" theories require that the marginal investor in a particular asset market be a specialized arbitrageur. Then the constraints faced by this arbitrageur (i.e. capital constraints) feed through into asset prices. We examine the mortgage-backed securities (MBS) market in this...
Persistent link: https://www.econbiz.de/10005130216
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Long-run and Cyclical Dynamics in the US Stock Market
Gil-Alana, L.A.; caporale, G.M. - Econometric Society - 2004
This paper examines the long-run dynamics and the cyclical structure of the US stock market using fractional integration techniques. We implement a version of the tests of Robinson (1994a), which enables one to consider unit (or fractional) roots both at the zero (long-run) and at the cyclical...
Persistent link: https://www.econbiz.de/10005063571
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Media Frenzies in Markets for Financial Information
Veldkamp, Laura - Econometric Society - 2004
-information/low-asset-price and high-information/high-asset-price equilibria raise price volatility and create price paths resembling periodic … market volatility increases, news coverage intensifies, and that more news is correlated with higher asset prices …
Persistent link: https://www.econbiz.de/10005063589
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Asymmetry of Information Flow Between Volatilities Across Time Scales
Gencay, Ramazan; Selcuk, Faruk - Econometric Society - 2004
volatility across different time scales. We call this property asymmetric vertical dependence. It is asymmetric in the sense that … a low volatility state (regime) at a long time horizon is most likely followed by low volatility states at shorter time … horizons. On the other hand, a high volatility state at long time horizons does not necessarily imply a high volatility state …
Persistent link: https://www.econbiz.de/10005329008
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Arbitraging Arbitrageurs
Ruckes, Martin E.; Attari, Mukarram; Mello, Antonio S. - Econometric Society - 2004
This paper develops a theory of strategic trading in markets with large influential arbitrageurs. If arbitrageurs are not very well-capitalized, margin requirements or capital constraints make their trades predictable. Other market participants can exploit this by trading against them....
Persistent link: https://www.econbiz.de/10005328933
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Liquidity Black Holes
Shin, Hyun Song; Morris, Stephen - Econometric Society - 2004
Traders with short horizons and privately known trading limits interact in a market for a risky asset. Risk-averse, long horizon traders supply a downward sloping residual demand curve that face the short-horizon traders. When the price falls close to the trading limits of the short horizon...
Persistent link: https://www.econbiz.de/10005328990
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Interest Rate Caps Smile Too! But Can the LIBOR Market Models Capture It?
Zhao, Feng; Jarrow, Robert; Li, Haitao - Econometric Society - 2004
volatility smile in cap prices. We find that Black (1976) implied volatilities exhibit an asymmetric smile (sometimes called a … sneer) with a stronger skew for in-the-money caps than out-of-the-money caps. The volatility smile is time varying and is … volatility or upward jumps. However, this model still has a bias for short- and medium-term caps. In addition, it appears that …
Persistent link: https://www.econbiz.de/10005328999
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Optimal Expectations
Parker, Jonathan A.; Brunnermeier, Markus K. - Econometric Society - 2004
This paper introduces a tractable, structural model of subjective beliefs. Since agents that plan for the future care about expected future utility flows, current felicity can be increased by believing that better outcomes are more likely. On the other hand, expectations that are biased towards...
Persistent link: https://www.econbiz.de/10005329011