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Measuring and Modelling Variation in the Risk-Return Trade-off

Lettau, Martin; Ludvigson, Sydney - C.E.P.R. Discussion Papers - 2001

? Can stock return predictability be explained by changes in stock market volatility? How does the mean return per unit risk … predictor of both the mean and volatility of excess stock market returns. We characterize the risk-return tradeoff as the … negatively linked to variation in market volatility, at odds with leading asset pricing models. Since the conditional volatility …

Persistent link: https://www.econbiz.de/10005498159

Dynamic Trading and Asset Prices: Keynes vs. Hayek

Cespa, Giovanni; Vives, Xavier - C.E.P.R. Discussion Papers - 2009

We investigate the dynamics of prices, information and expectations in a competitive, noisy, dynamic asset pricing equilibrium model. We show that prices are farther away from (closer to) fundamentals compared with average expectations if and only if traders over- (under-) rely on public...

Persistent link: https://www.econbiz.de/10008477180

Momentum and Turnover: Evidence from the German Stock Market

Glaser, Markus; Weber, Martin - C.E.P.R. Discussion Papers - 2002

This Paper analyses the relation between momentum strategies (strategies that buy stocks with high returns over the previous three to 12 months and sell stocks with low returns over the same period) and turnover (number of shares traded divided by the number of shares outstanding) for the German...

Persistent link: https://www.econbiz.de/10005136650

Information Sales and Insider Trading

Cespa, Giovanni - C.E.P.R. Discussion Papers - 2004

Fundamental information resembles in many respects a durable good. Hence, the effects of its incorporation into stock prices depend on who is the agent controlling its flow. Similarly to a durable goods monopolist, a monopolistic analyst selling information intertemporally competes against...

Persistent link: https://www.econbiz.de/10005067575

Learning from Prices, Liquidity Spillovers, and Market Segmentation

Cespa, Giovanni; Foucault, Thierry - C.E.P.R. Discussion Papers - 2011

We describe a new mechanism that explains the transmission of liquidity shocks from one security to another ("liquidity spillovers"). Dealers use prices of other securities as a source of information. As prices of less liquid securities convey less precise information, a drop in liquidity for...

Persistent link: https://www.econbiz.de/10009003369

Expectations, Liquidity, and Short-term Trading

Cespa, Giovanni; Vives, Xavier - C.E.P.R. Discussion Papers - 2011

In a market with short term agents and heterogeneous information, when liquidity trading displays persistence, prices reflect average expectations about fundamentals and liquidity trading. Informed investors exploit a private learning channel to infer the demand of liquidity traders from the...

Persistent link: https://www.econbiz.de/10008873331

Why is Long-Horizon Equity Less Risky? A Duration-based Explanation of the Value Premium

Lettau, Martin; Wachter, Jessica - C.E.P.R. Discussion Papers - 2005

This paper proposes a dynamic risk-based model that captures the high expected returns on value stocks relative to growth stocks, and the failure of the capital asset pricing model to explain these expected returns. To model the difference between value and growth stocks, we introduce a...

Persistent link: https://www.econbiz.de/10005504287

Euler Equation Errors

Lettau, Martin; Ludvigson, Sydney - C.E.P.R. Discussion Papers - 2005

Among the most important pieces of empirical evidence against the standard representative agent, consumption-based asset pricing paradigm are the formidable unconditional Euler equation errors the model produces for cross-sections of asset returns. Here we ask whether calibrated leading asset...

Persistent link: https://www.econbiz.de/10005504372

Expected Returns and Expected Dividend Growth

Lettau, Martin; Ludvigson, Sydney - C.E.P.R. Discussion Papers - 2002

We develop a consumption-based present value relation that is a function of future dividend growth. Using data on aggregate consumption and measures of the dividend payments from aggregate wealth, we show that changing forecasts of dividend growth make an important contribution to fluctuations...

Persistent link: https://www.econbiz.de/10005504785

Asset Pricing with Liquidity Risk

Acharya, Viral V; Pedersen, Lasse Heje - C.E.P.R. Discussion Papers - 2004

This Paper solves explicitly a simple equilibrium asset pricing model with liquidity risk – the risk arising from unpredictable changes in liquidity over time. In our liquidity-adjusted capital asset pricing model, a security’s required return depends on its expected liquidity as well as on...

Persistent link: https://www.econbiz.de/10005791242

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