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Purportedly consistent with “risk parity” (RP) asset allocation, recent studies document compelling “low risk” trading strategies that exploit a persistently negative relation between Sharpe ratios (SRs) and maturity along the U.S. Treasury (UST) term structure. This paper extends this...
Persistent link: https://www.econbiz.de/10011123661
A small but ambitious literature uses affine arbitrage-free models to estimate jointly U.S. Treasury term premiums and the term structure of equity risk premiums. Within this approach, this paper identifies the parameter restrictions that are consistent with a simple dividend discount model,...
Persistent link: https://www.econbiz.de/10010735679
A vast literature reports excess returns to momentum strategies across many financial asset classes. However, no study examines trading rules based on price history along individual government-bond term structures—that is, with respect to duration buckets across the curve—as opposed to...
Persistent link: https://www.econbiz.de/10011027211
Forward foreign exchange contracts embed not only expected depreciation but also a sizable premium, which complicates inferences about anticipated returns. This study derives arbitrage-free affine forward currency models (AFCMs) with closed-form expressions for both unobservable variables. Model...
Persistent link: https://www.econbiz.de/10010751385
This paper develops a model of macroeconomic forecasting in which a forecaster's wage is a function of his accuracy as …
Persistent link: https://www.econbiz.de/10005512210
Persistent link: https://www.econbiz.de/10005512217
This paper evaluates rigorously the predictive power of the head-and-shoulders pattern as applied to daily exchange rates. Though such visual, nonlinear chart patterns are applied frequently by technical analysts, our paper is one of the first to evaluate the predictive power of such patterns....
Persistent link: https://www.econbiz.de/10005526287
Beginning in 1998, U.S. commercial banks may determine their regulatory capital requirements for financial market risk exposure using value-at-risk (VaR) models i.e., models of the time-varying distributions of portfolio returns. Currently, regulators have available three hypothesis-testing...
Persistent link: https://www.econbiz.de/10005526313
This paper presents a theoretical model of exchange-rate determination intended to address the forward premium puzzle. It also explains the empirical observation that risk premiums depend on interest differentials. The model's closed-form solution indicates that currency risk premiums depend on...
Persistent link: https://www.econbiz.de/10005420480
In a factor-augmented regression, the forecast of a variable depends on a few factors estimated from a large number of predictors. But how does one determine the appropriate number of factors relevant for such a regression? Existing work has focused on criteria that can consistently estimate the...
Persistent link: https://www.econbiz.de/10005420506