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Previous empirical studies derive the standard equity valuation models (i.e., DDM, RIM, and DCF model) while assuming that ideal conditions, such as infinite payoffs and clean surplus accounting, exist. Because these conditions are rarely met, we extend the standard models by following the...
Persistent link: https://www.econbiz.de/10013097055
Standard equity valuation approaches (i.e., DDM, RIM, and DCF model) are derived under the assumption of ideal conditions, such as infinite payoffs and clean surplus accounting. Because these conditions are hardly ever met, we extend the standard approaches, based on the fundamental principle of...
Persistent link: https://www.econbiz.de/10009270446
Persistent link: https://www.econbiz.de/10014301853
A new estimator is proposed for linear triangular systems, where identification results from the model errors following a bivariate and diagonal GARCH(1,1) process with potentially time-varying error covariances. This estimator applies when traditional instruments are unavailable. I demonstrate...
Persistent link: https://www.econbiz.de/10013037626
, unless called for by theory. Regardless, a scale variable should be included as an additional regressor …
Persistent link: https://www.econbiz.de/10013150510
Exponential affine models (EAMs) are factor models popular in financial asset pricing requiring a dynamic term structure, such as for interest rates and commodity futures. When implementing EAMs it is usual to first specify the model in state space form (SSF) and then to estimate it using the...
Persistent link: https://www.econbiz.de/10013156832
Forecasting the production of photovoltaic (PV) and wind power systems inevitably implies inaccuracies. Therefore, sales made based on forecasts almost always require the vendor to make balancing efforts. In the absence of resources available within their own portfolios, operators can turn...
Persistent link: https://www.econbiz.de/10013051372
Persistent link: https://www.econbiz.de/10012896157
This paper shows that the consumption-based asset pricing model (C-CAPM) with low-probability disaster risk rationalizes large pricing errors, i.e., Euler equation errors. This result is remarkable, since Lettau and Ludvigson (2009) show that leading asset pricing models cannot explain sizeable...
Persistent link: https://www.econbiz.de/10010338284
This paper analyzes and quantifies the idea of model risk in the environment of internal model building. We define various types of model risk including estimation risk, model risk in distribution and model risk in functional form. By the quantification of these concepts we analyze the impact of...
Persistent link: https://www.econbiz.de/10008909530