Showing 1 - 6 of 6
We show that aggregate consumption risks embodied in cash flows can account for the puzzling differences in risk premia across book-to-market, momentum, and size-sorted portfolios. The dynamics of aggregate consumption and cash flow growth rates, modeled as a vector autoregression, are used to...
Persistent link: https://www.econbiz.de/10005302420
We develop a term structure model where the short interest rate and the market price of risks are subject to discrete regime shifts. Empirical evidence from efficient method of moments estimation provides considerable support for the regime shifts model. Standard models, which include affine...
Persistent link: https://www.econbiz.de/10005214470
We model consumption and dividend growth rates as containing (1) a small long-run predictable component, and (2) fluctuating economic uncertainty (consumption volatility). These dynamics, for which we provide empirical support, in conjunction with <link rid="b27">Epstein and Zin's (1989)</link> preferences, can...
Persistent link: https://www.econbiz.de/10005214664
This paper uses a nonlinear arbitrage-pricing model, a conditional linear model, and an unconditional linear model to price international equities, bonds, and forward currency contracts. Unlike linear models, the nonlinear arbitrage-pricing model requires no restrictions on the payoff space,...
Persistent link: https://www.econbiz.de/10005334561
The authors argue that arbitrage pricing theories (APT) imply the existence of a low-dimensional nonnegative nonlinear pricing kernel. In contrast to standard constructs of the APT, they do not assume a linear factor structure on the payoffs. This allows the authors to price both primitive and...
Persistent link: https://www.econbiz.de/10005691150
type="main" <title type="main">ABSTRACT</title> <p>How important are volatility fluctuations for asset prices and the macroeconomy? We find that an increase in macroeconomic volatility is associated with an increase in discount rates and a decline in consumption. We develop a framework in which cash flow, discount rate, and...</p>
Persistent link: https://www.econbiz.de/10011147919