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Arbitrage and beliefs
Khorrami, Paymon; Zentefis, Alexander K. - 2020
exists, arbitrage opportunities must also exist. Conversely, at times when arbitrage profits exist, asset markets are … susceptible to self-fulfilling fluctuations. The tight theoretical connection between price volatility and arbitrage is detectable …
Persistent link: https://www.econbiz.de/10012260973
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Optimality and diversifiability of mean variance and arbitrage pricing portfolios
Pesaran, M. Hashem; Zaffaroni, Paolo - 2009
This paper investigates the limit properties of mean-variance (mv) and arbitrage pricing (ap) trading strategies using … literature for the exact pricing case to two other cases of asymptotic no-arbitrage and the unconstrained pricing scenarios. The … ; mean-variance portfolio ; arbitrage pricing ; market (beta) neutrality ; well diversification …
Persistent link: https://www.econbiz.de/10003910456
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The role of factor strength and pricing errors for estimation and inference in asset pricing models
Pesaran, M. Hashem; Smith, Ron - 2019
In this paper we are concerned with the role of factor strength and pricing errors in asset pricing models, and their implications for identification and estimation of risk premia. We establish an explicit relationship between the pricing errors and the presence of weak factors that are...
Persistent link: https://www.econbiz.de/10012118575
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Is hard Brexit detrimental to EU integration? : theory and evidence
Mikolajun, Irena; Viaene, Jean-Marie - 2018
integration benchmark that consists of the steady state production equilibrium characterized by arbitrage pricing and perfect …
Persistent link: https://www.econbiz.de/10011892540
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Sovereign default risk and banks in a monetary union
Uhlig, Harald - 2013 - This revision: August 12, 2013
This paper seeks to understand the interplay between banks, bank regulation, sovereign default risk and central bank guarantees in a monetary union. I assume that banks can use sovereign bonds for repurchase agreements with a common central bank, and that their sovereign partially backs up any...
Persistent link: https://www.econbiz.de/10009786077
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Factor strengths, pricing errors, and estimation of risk premia
Pesaran, M. Hashem; Smith, Ron - 2021
This paper examines the implications of pricing errors and factors that are not strong for the Fama-MacBeth two-pass estimator of risk premia and its asymptotic distribution when T is fixed with n → ∞, and when both n and T → ∞, jointly. While the literature just distinguishes strong and...
Persistent link: https://www.econbiz.de/10012486668
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Arbitrage pricing theory, the stochastic discount factor and estimation of risk premia from portfolios
Pesaran, M. Hashem; Smith, Ron - 2021
The arbitrage pricing theory (APT) attributes differences in expected returns to exposure to systematic risk factors …
Persistent link: https://www.econbiz.de/10012499632
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Optimal monetary policy when agents are learning
Molnár, Krisztina; Santoro, Sergio - 2010
We derive the optimal monetary policy in a sticky price model when private agents follow adaptive learning. We show that this slight departure from rationality has important implications for policy design. The central bank faces a new intertemporal trade-off, not present under rational...
Persistent link: https://www.econbiz.de/10003974493
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Are stationary hyperinflation paths learnable?
Adam, Klaus; Evans, George W.; Honkapoja, Seppo - 2003
Earlier studies of the seigniorage inflation model have found that the high-inflation steady state is not stable under adaptive learning. We reconsider this issue and analyze the full set of solutions for the linearized model. Our main focus is on stationary hyperinflationary paths near the...
Persistent link: https://www.econbiz.de/10011507885
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Learning stability in economies with heterogenous agents
Honkapohja, Seppo; Mitra, Kaushik - 2002
An economy exhibits structural heterogeneity when the forecasts of different agents have different effects on the determination of aggregate variables. Various forms of structural heterogeneity can arise and we study the important case of economies in which agents' behavior depends on forecasts...
Persistent link: https://www.econbiz.de/10011541172