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, arises because these models load all uncertainty onto the supply side of the economy. We propose a simple theory of asset … pricing in which demand shocks play a central role. These shocks give rise to valuation risk that allows the model to account …
Persistent link: https://www.econbiz.de/10013096467
asset prices and corporate default risk. Our model includes two empirically grounded nominal frictions: fixed nominal …
Persistent link: https://www.econbiz.de/10012907126
dividend yield is typically viewed as a reflection of either changing risk, related to the business cycle, or irrational … risk as well as expected return, we develop Bayesian methods to examine the interaction between the data and an investor … and a riskless asset. In general, however, the simple risk/return model of Merton (1980) explains very little of the yield …
Persistent link: https://www.econbiz.de/10012763077
unconditional cross-sectional moments of household consumption growth and the moments of the risk-free rate, equity premium, price …-dividend ratio, and aggregate dividend and consumption growth. The model-implied risk-free rate and price-dividend ratio are … procyclical while the market return has countercyclical mean and variance. Finally, household consumption risk explains the cross …
Persistent link: https://www.econbiz.de/10013054039
Persistent link: https://www.econbiz.de/10009710931
We extend Kyle's (1985) model of insider trading to the case where liquidity provided by noise traders follows a general stochastic process. Even though the level of noise trading volatility is observable, in equilibrium, measured price impact is stochastic. If noise trading volatility is...
Persistent link: https://www.econbiz.de/10013099416
growth rates, or stochastic probability of disaster, asset pricing with stochastic risk premia or stochastic dividend growth …
Persistent link: https://www.econbiz.de/10012759796
the guarantee-extending parties to "walk away". I derive the optimal risk management rule in such a framework and show … that it allows high volatility choices, while net worth is high. However, risk limits tighten abruptly when the firm's net … risk management rules, and can account for phenomena such as "flight to quality" …
Persistent link: https://www.econbiz.de/10013152555
Liquidity risk in banking has been attributed to transactions deposits and their potential to spark runs or panics. We … show instead that transactions deposits help banks hedge liquidity risk from unused loan commitments. Bank stock …. This deposit-lending risk management synergy becomes more powerful during periods of tight liquidity, when nervous …
Persistent link: https://www.econbiz.de/10012780123
This paper studies predatory trading: trading that induces and/or exploits other investors' need to reduce their positions. We show that if one trader needs to sell, others also sell and subsequently buy back the asset. This leads to price overshooting and a reduced liquidation value for the...
Persistent link: https://www.econbiz.de/10012785459