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Measuring market and inflation risk premia in France and in Germany

Cappiello, Lorenzo; Guéné, Stéphane - 2005

Capital Asset Pricing Model à la Merton (1973), with inflation as an independent source of risk, for France and Germany. Our … the convergence process towards the single currency might have affected the role of inflation in the pricing of financial … assets. We find that inflation is a significant explanatory factor for the pricing of stocks and government bonds in the two …

Persistent link: https://www.econbiz.de/10011604482

The uncovered return parity condition

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

Stock market volatility and learning

Adam, Klaus; Marcet, Albert; Nicolini, Juan Pablo - 2008

Introducing bounded rationality into a standard consumption based asset pricing model with a representative agent and …

Persistent link: https://www.econbiz.de/10011604908

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

Imperfect predictability and mutual fund dynamics. How managers use predictors in changing systematic risk.

Amisano, Gianni; Savona, Roberto - 2008

Suppose a fund manager uses predictors in changing port-folio allocations over time. How does predictability translate into portfolio decisions? To answer this question we derive a new model within the Bayesian framework, where managers are assumed to modulate the systematic risk in part by...

Persistent link: https://www.econbiz.de/10011604927

Country and industry equity risk premia in the euro area: an intertemporal approach

Cappiello, Lorenzo; Lo Duca, Marco; Maddaloni, Angela - 2008

This paper provides new evidence on the dynamics of equity risk premia in euro area stock markets across country and industry portfolios. We develop and estimate a conditional intertemporal CAPM where returns on aggregate euro area, country and industry portfolios depend on the market risk as...

Persistent link: https://www.econbiz.de/10011604959

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

Asset pricing, habit memory, and the labor market

Jaccard, Ivan - 2010

This article studies the asset pricing and the business cycle implications of habit formation in a production economy …. This mechanism enhances the model’s ability to explain asset pricing puzzles. …

Persistent link: https://www.econbiz.de/10011605209