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Cappiello, Lorenzo; De Santis, Roberto A. - 2007

This paper proposes an equilibrium relationship between expected exchange rate changes and differentials in expected returns on risky assets. We show that when expected returns on a risky asset in a certain economy are higher than the returns that are expected from investing in a risky asset in...

Persistent link: https://www.econbiz.de/10011604858

Hierarchical Markov normal mixture models with applications to financial asset returns

Geweke, John; Amisano, Gianni - 2007

With the aim of constructing predictive distributions for daily returns, we introduce a new Markov normal mixture model in which the components are themselves normal mixtures. We derive the restrictions on the autocovariances and linear representation of integer powers of the time series in...

Persistent link: https://www.econbiz.de/10011604877

How arbitrage-free is the Nelson-Siegel Model?

Coroneo, Laura; Nyholm, Ken; Vidova-Koleva, Rositsa - 2008

We test whether the Nelson and Siegel (1987) yield curve model is arbitrage-free in a statistical sense. Theoretically, the Nelson-Siegel model does not ensure the absence of arbitrage opportunities, as shown by Bjork and Christensen (1999). Still, central banks and public wealth managers rely...

Persistent link: https://www.econbiz.de/10011604920

International stock return comovements

Bekaert, Geert; Hodrick, Robert J.; Zhang, Xiaoyan - 2008

We examine international stock return comovements using country-industry and country-style portfolios as the base portfolios. We first establish that parsimonious risk-based factor models capture the covariance structure of the data better than the popular Heston- ouwenhorst (1994) model. We...

Persistent link: https://www.econbiz.de/10011604977

The term structure of equity premia in an affine arbitrage-free model of bond and stock market dynamics

Lemke, Wolfgang; Werner, Thomas - 2009

We estimate time-varying expected excess returns on the US stock market from 1983 to 2008 using a model that jointly captures the arbitrage-free dynamics of stock returns and nominal bond yields. The model nests the class of affine term structure (of interest rates) models. Stock returns and...

Persistent link: https://www.econbiz.de/10011605091

Multimarket trading and the cost of debt: evidence from global bonds

Petrasek, Lubomir - 2010

Global bonds are international securities designed to be traded and settled efficiently in multiple markets. This paper studies global bonds to examine the effects of multimarket trading on corporate bond liquidity, prices, and the cost of debt. Using a sample of primary and secondary market...

Persistent link: https://www.econbiz.de/10011605258

The term structure of inflation expectations

Adrian, Tobias (contributor); Wu, Hao (contributor) - 2009

yield curves. The model features stochastic covariation of inflation with the real pricing kernel, enabling us to extract a … ; asset pricing ; monetary policy …

Persistent link: https://www.econbiz.de/10003812556

Broker-dealer risk appetite and commodity returns

Etula, Erkko M. - 2010 - Rev.

derivatives are traded primarily over the counter. I capture the limits of arbitrage in this market in a simple asset-pricing …-bearing capacity have particularly strong forecasting power for energy returns, both in sample and out of sample. -- Asset pricing …

Persistent link: https://www.econbiz.de/10003947918

Funding liquidity risk and the cross-section of stock returns

Adrian, Tobias; Etula, Erkko M. - 2010

We derive equilibrium pricing implications from an intertemporal capital asset pricing model where the tightness of … financial intermediaries’ funding constraints enters the pricing kernel. We test the resulting factor model in the cross … lower average returns. The pricing performance of our three-factor model is surprisingly strong across specifications and …

Persistent link: https://www.econbiz.de/10008657196

The term structure of the price of variance risk

Andries, Marianne; Eisenbach, Thomas M.; Schmalz, Martin C. - 2015

We estimate the term structure of the price of variance risk (PVR), which helps distinguish between competing asset-pricing … of established asset-pricing models that assume constant risk aversion across maturities. …

Persistent link: https://www.econbiz.de/10011303715