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The term structure of equity returns is downward-sloping: stocks with high cash flow duration earn 1.10% per month lower returns than short-duration stocks in the cross section. I create a measure of cash flow duration at the firm level using balance sheet data to show this novel fact. Factor...
Persistent link: https://www.econbiz.de/10012981605
Turnovsky (1995) derives in a continuous-time model of a decentralized economy that the correct specification of the firm's objective function is to maximize the initial value of its outstanding securities. The firm value is the discounted flow of real earnings. For the discrete-time version of...
Persistent link: https://www.econbiz.de/10013143832
This paper examines short-term price reactions after one-day abnormal price changes and whether they create exploitable profit opportunities in various financial markets. A t-test confirms the presence of overreactions and also suggests that there is an “inertia anomaly”, i.e. after an...
Persistent link: https://www.econbiz.de/10013043247
From 1963 through 2015, idiosyncratic risk (IR) is high when market risk (MR) is high. We show that the positive … has roots in fundamentals. Higher market risk predicts greater idiosyncratic earnings volatility as well as dispersion and …
Persistent link: https://www.econbiz.de/10012950299
making and risk management. Over the past three decades there has been a trend towards increased asset return correlations … models proposed in the literature can be used to formally characterize and quantify market risk. In particular, we ask how … adequate these models are for modelling market risk at times of financial crisis. In doing so we consider a multivariate t …
Persistent link: https://www.econbiz.de/10013094817
We propose a new method (implemented in an R-program) to simulate long-range daily stock-price data. The program reproduces various stylized facts much better than various parametric models from the extended GARCH-family. In particular, the empirically observed changes in unconditional variance...
Persistent link: https://www.econbiz.de/10012994786
Using the Hamilton-Jacobi-Bellman equation, we derive both a Keynes-Ramsey rule and a closed form solution for an optimal consumption-investment problem with labor income. The utility function is unbounded and uncertainty stems from a Poisson process. Our results can be derived because of the...
Persistent link: https://www.econbiz.de/10013317637
Natural gas is likely to become increasingly important in the future. Understanding the stochastic underpinnings of natural gas prices will be critical, both to policy analysts and to market participants. To this end, we investigate the potential presence of jumps in natural gas spot prices in...
Persistent link: https://www.econbiz.de/10013058515
We define a class of risk-taking-neutral (RTN) background risks. These background risks have the property that they … will not alter decisions made with respect to another risk, for individuals with HARA utility. If we wish to compare a … decision made with and without some exogenous background risk, it is often easier to compare the decision made to one made with …
Persistent link: https://www.econbiz.de/10013087730
the magnitude of the optimal paygo program and the nature of the underlying risk sharing effects are very sensitive to the … chosen combination of risk concepts and stochastic specification of long run aggregate wage income growth. In an additive way … we distinguish between the pooling of wage and capital risks within periods and two different intertemporal risk sharing …
Persistent link: https://www.econbiz.de/10012778396