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Cointegration and Tests of Present Value Models

Campbell, John Y. - 1986

In a model where a variable Y[sub t] is proportional to the present value, with constant discount rate, of expected future values of a variable y[sub t] the "spread" S[sub t]= Y[sub t] - [theta sub t] will be stationary for some [theta] whether or not y[sub t]must be differenced to induce...

Persistent link: https://www.econbiz.de/10012477190

Nonrenewable Resource Prices : Deterministic or Stochastic Trends?

Lee, Junsoo - 2005

In this paper we examine temporal properties of eleven natural resource real price series from 1870-1990 by employing a Lagrangian Multiplier unit root test that allows for two endogenously determined structural breaks with and without a quadratic trend. Contrary to previous research, we find...

Persistent link: https://www.econbiz.de/10012467192

Recursive and Sequential Tests of the Unit Root and Trend Break Hypothesis : Theory and International Evidence

Banerjee, Anindya - 1990

This paper investigates the possibility, raised by Perron (1989, 1990a), that aggregate economic time series can be characterized as being stationary around broken trend lines. Unlike Perron, we treat the break date as unknown a priori. Asymptotic distributions are developed for recursive,...

Persistent link: https://www.econbiz.de/10012475507

Spurious Trend and Cycle in the State Space Decomposition of a Time Series with a Unit Root

Nelson, Charles R. - 1987

Recent research has proposed the state space (88) framework for decomposition of GNP and other economic time series into trend and cycle components, using the Kalman filter. This paper reviews the empirical evidence and suggests that the resulting decomposition may be spurious, just as...

Persistent link: https://www.econbiz.de/10012476643

Do Asset Prices Reflect Fundamentals? Freshly Squeezed Evidence from the OJ Market

Boudoukh, Jacob - 2003

fundamentals, focusing primarily on temperature. We show that when theory clearly identifies the fundamental, i.e., at temperatures …-thirds of the entire winter return variability occurs on these days. Moreover, when theory suggests no such relation, i.e., at … is good news for the theory and for market efficiency, not bad news. In terms of residual FCOJ return volatility, we also …

Persistent link: https://www.econbiz.de/10012469188

Enforcement Problems and Secondary Markets

Broner, Fernando A. - 2007

There is a large and growing literature that studies the effects of weak enforcement institutions on economic performance. This literature has focused almost exclusively on primary markets, in which assets are issued and traded to improve the allocation of investment and consumption. The general...

Persistent link: https://www.econbiz.de/10012465088

Financial Super-Markets : Size Matters for Asset Trade

Martin, Philippe - 2001

We introduce a new theoretical framework to analyze imperfectly competitive financial markets and trade in assets in an international context. We present a two-country macroeconomic model in which agents are risk averse, assets are imperfect substitutes, the number of financial assets is...

Persistent link: https://www.econbiz.de/10012470242

Efficiently Inefficient Markets for Assets and Asset Management

Gârleanu, Nicolae B. - 2015

We consider a model where investors can invest directly or search for an asset manager, information about assets is costly, and managers charge an endogenous fee. The efficiency of asset prices is linked to the efficiency of the asset management market: if investors can find managers more...

Persistent link: https://www.econbiz.de/10012457106

The Inefficient Markets Hypothesis : Why Financial Markets Do Not Work Well in the Real World

Farmer, Roger E.A. - 2012

Existing literature continues to be unable to offer a convincing explanation for the volatility of the stochastic discount factor in real world data. Our work provides such an explanation. We do not rely on frictions, market in completeness or transactions costs of any kind. Instead, we modify a...

Persistent link: https://www.econbiz.de/10012460013

Counterparty Risk Externality : Centralized Versus Over-the-counter Markets

Acharya, Viral V. - 2011

We model the opacity of over-the-counter (OTC) markets in a setup where agents share risks, but have incentives to default and their financial positions are not mutually observable. We show that this setup results in excess "leverage" in that parties take on short OTC positions that lead to...

Persistent link: https://www.econbiz.de/10012461658

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