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The equity premium (also called market risk premium, equity risk premium, market premium and risk premium), is one of the most important, discussed but elusive parameters in finance. The term equity premium is used to designate four different concepts (although many times they are mixed):...
Persistent link: https://www.econbiz.de/10005835788
Standard consumption-based asset pricing models focus on the consumption risk, seen as the only source of fluctuations and information about risk for the informed investor. These models, however, can account for high expected excess stock return only when assuming implausible relative risk...
Persistent link: https://www.econbiz.de/10008871311
Bansal and Yaron (2004) demonstrate, by calibration, that the Consumption-Based Capital Asset Pricing Model (CCAPM) can be rescued by assuming that consumption growth rate follows a stochastic volatility model. They show that the conditional equity premium is a linear function of conditional...
Persistent link: https://www.econbiz.de/10011113628
Rational bubbles are believed to be fragile and unable to explain the trading frenzy associated to price run-ups. With limited enforcement of credit contracts and endogenous debt limits designed to prevent default and allow for maximal credit expansion, a large class of bubbles can be introduced...
Persistent link: https://www.econbiz.de/10009650025
A disturbing feature of the conventional objective function for intertemporal decisions under uncertainty is that the agent's attitudes toward intertemporal substitution and risk aversion are entangled. This paper shows that, in contrast to common perception, the two attitudes can be completely...
Persistent link: https://www.econbiz.de/10005260195
We propose a simple and intuitive method for estimating betas when factors are measured with error: ordinary least squares instrumental variable estimator (OLIVE). OLIVE performs well when the number of instruments becomes large, while the performance of conventional instrumental variable...
Persistent link: https://www.econbiz.de/10009367968
errors following a bivariate and diagonal GARCH(1,1) process. The associated estimator is a GMM estimator shown to have the …
Persistent link: https://www.econbiz.de/10009322633
consistency of the generalized method of moments (GMM) estimator, as long as agents form rational expectations. …
Persistent link: https://www.econbiz.de/10011109608
We propose a generalized method of moment (GMM) estimator of the number of latent factors in linear factor models. The …
Persistent link: https://www.econbiz.de/10005786921
Efficient GMM estimation of the semi-strong GARCH(1,1) model requires simultaneous estimation of the conditional third … and fourth moments. This paper proposes a simple alternative to efficient GMM based upon the unconditional skewness of … instruments. Sequential estimation involves TSLS in a first step followed by linear GMM. Simultaneous estimation involves either …
Persistent link: https://www.econbiz.de/10008543477