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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

Market discipline, financial integration and fiscal rules: what drives spreads in the euro area government bond market?

Manganelli, Simone; Wolswijk, Guido - 2007

This paper studies the determinants of interest rate spreads of euro area 10 year government bonds against the benchmark, the German bund, after the introduction of the euro. In particular, it pays attention to the question whether market discipline is advanced or obstructed by financial...

Persistent link: https://www.econbiz.de/10011604791

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

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

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

Liquidity premia in German government bonds

Ejsing, Jacob; Sihvonen, Jukka - 2009

find that on-the-run status has only a negligible effect on the liquidity and pricing once other factors have been …

Persistent link: https://www.econbiz.de/10011605127

What explains the surge in euro area sovereign spreads during the financial crisis of 2007-09?

Attinasi, Maria-Grazia; Checherita-Westphal, Cristina; … - 2009

This paper uses a dynamic panel approach to explain the determinants of widening sovereign bond yield spreads vis-à-vis Germany in selected euro area countries during the period end-July 2007 to end-March 2009, when the financial turmoil developed into a full-blown financial and economic...

Persistent link: https://www.econbiz.de/10011605177