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Econometric Analysis of Present Value Models When the Discount Factor Is near One

West, Kenneth D. - National Bureau of Economic Research (NBER) - 2012

This paper develops asymptotic econometric theory to help understand data generated by a present value model with a discount factor near one. A leading application is to exchange rate models. A key assumption of the asymptotic theory is that the discount factor approaches 1 as the sample size...

Persistent link: https://www.econbiz.de/10010785624

Maximum likelihood estimation of the equity premium

Wachter, Jessica A.; Avdis, Efstathios - National Bureau of Economic Research (NBER) - 2013

The equity premium, namely the expected return on the aggregate stock market less the government bill rate, is of central importance to the portfolio allocation of individuals, to the investment decisions of firms, and to model calibration and testing. This quantity is usually estimated from the...

Persistent link: https://www.econbiz.de/10010796711

Solving Dynamic Programming Problems on a Computational Grid

Judd, Kenneth L.; Cai, Yongyang; Thain, Greg; Wright, … - National Bureau of Economic Research (NBER) - 2013

We implement a dynamic programming algorithm on a computational grid consisting of loosely coupled processors, possibly including clusters and individual workstations. The grid changes dynamically during the computation, as processors enter and leave the pool of workstations. The algorithm is...

Persistent link: https://www.econbiz.de/10011272300

Numerical Solution of Dynamic Portfolio Optimization with Transaction Costs

Judd, Kenneth L.; Cai, Yongyang; Xu, Rong - National Bureau of Economic Research (NBER) - 2013

We apply numerical dynamic programming to multi-asset dynamic portfolio optimization problems with proportional transaction costs. Examples include problems with one safe asset plus two to six risky stocks, and seven to 360 trading periods in a finite horizon problem. These examples show that it...

Persistent link: https://www.econbiz.de/10010603699

Foreign Ownership of U.S. Safe Assets: Good or Bad?

Ludvigson, Sydney C.; Van Nieuwerburgh, Stijn; … - National Bureau of Economic Research (NBER) - 2014

The last 20 years have been marked by a sharp rise in international demand for U.S. reserve assets, or safe stores-of-value. What are the welfare consequences to U.S. households of these trends, or of a reversal? In a lifecycle model with aggregate and idiosyncratic risks, the young and oldest...

Persistent link: https://www.econbiz.de/10010969327

Conditional Risk Premia in Currency Markets and Other Asset Classes

Lettau, Martin; Maggiori, Matteo; Weber, Michael - National Bureau of Economic Research (NBER) - 2013

The downside risk CAPM (DR-CAPM) can price the cross section of currency returns. The market-beta differential between high and low interest rate currencies is higher conditional on bad market returns, when the market price of risk is also high, than it is conditional on good market returns....

Persistent link: https://www.econbiz.de/10010969442

International Financial Integration and Crisis Contagion

Devereux, Michael B.; Yu, Changhua - National Bureau of Economic Research (NBER) - 2014

International financial integration helps to diversify risk but also may increase the trans- mission of crises across countries. We provide a quantitative analysis of this trade-off in a two-country general equilibrium model with endogenous portfolio choice and collateral con- straints....

Persistent link: https://www.econbiz.de/10010950927

The Golden Dilemma

Harvey, Campbell; Erb, Claude B. - National Bureau of Economic Research (NBER) - 2013

While gold objects have existed for thousands of years, gold's role in diversified portfolios is not well understood …. We critically examine popular stories such as 'gold is an inflation hedge'. We show that gold may be an effective hedge … if the investment horizon is measured in centuries. Over practical investment horizons, gold is an unreliable inflation …

Persistent link: https://www.econbiz.de/10010951171

Financial Globalization, Corporate Governance, and Eastern Europe

Stulz, Rene M. - National Bureau of Economic Research (NBER) - 2006

financial world is not flat because poor governance prevents firms from being widely held and from taking full advantage of …

Persistent link: https://www.econbiz.de/10005079177

International Portfolio Diversification and Multilateral Effects of Correlations

Bergin, Paul; Pyun, Ju Hyun - National Bureau of Economic Research (NBER) - 2012

Not only are investors biased toward home assets, but when they do invest abroad, they appear to favor countries with returns more correlated with home assets. Often attributed to a preference for familiarity, this ‘correlation puzzle’ further reduces effective diversification. However, a...

Persistent link: https://www.econbiz.de/10009654195

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