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Inference, arbitrage, and asset price volatility

Adrian, Tobias (contributor) - 2004 - [Elektronische Ressource], Rev. February 2008

, informed investors, and noise traders. Arbitrageurs face a trade-off between arbitrage and inference: they would like to buy … assets in response to temporary price declines (the arbitrage effect) but sell when prices decline permanently (the inference … effect). In equilibrium, the presence of arbitrageurs increases volatility when the inference effect dominates the arbitrage …

Persistent link: https://www.econbiz.de/10002101431

The term structure of inflation expectations

Adrian, Tobias (contributor); Wu, Hao (contributor) - 2009

We present estimates of the term structure of inflation expectations, derived from an affine model of real and nominal yield curves. The model features stochastic covariation of inflation with the real pricing kernel, enabling us to extract a time-varying inflation risk premium. We fit the model...

Persistent link: https://www.econbiz.de/10003812556

Leverage asset pricing

Adrian, Tobias; Mönch, Emanuel; Shin, Hyun Song - 2013

We investigate intermediary asset pricing theories empirically and find strong support for models that have intermediary leverage as the relevant state variable. A parsimonious model that uses detrended dealer leverage as a price-of-risk variable, and innovations to dealer leverage as a pricing...

Persistent link: https://www.econbiz.de/10009787499

Financial intermediation, asset prices, and macroeconomic dynamics

Adrian, Tobias; Mönch, Emanuel; Shin, Hyun Song - 2010

Fluctuations in the aggregate balance sheets of financial intermediaries provide a window on the joint determination of asset prices and macroeconomic aggregates. We document that financial intermediary balance sheets contain strong predictive power for future excess returns on a broad set of...

Persistent link: https://www.econbiz.de/10003948219

Financial vulnerability and monetary policy

Adrian, Tobias; Duarte, Fernando - 2017 - Revised September 2017

We present a microfounded New Keynesian model that features financial vulnerabilities. Financial intermediaries' occasionally binding value-at-risk constraints give rise to variation in the pricing of risk that generates time-varying risk in the conditional mean and volatility of the output gap....

Persistent link: https://www.econbiz.de/10011576278

Pricing the term structure with linear regressions

Adrian, Tobias (contributor); Mönch, Emanuel (contributor) - 2008

We show how to price the time series and cross section of zero coupon bonds via ordinary least squares regressions. Our approach allows computationally fast estimation of term structure models with a large number of pricing factors. Even though we do not impose cross-equation restrictions in the...

Persistent link: https://www.econbiz.de/10003781680

The cost of capital of the financial sector

Adrian, Tobias; Friedman, Evan; Muir, Tyler - 2015

Standard factor pricing models do not capture well the common time-series or cross-sectional variation in average returns of financial stocks. We propose a five-factor asset pricing model that complements the standard Fama and French (1993) three-factor model with a financial sector ROE factor...

Persistent link: https://www.econbiz.de/10011410520

Learning about beta: time-varying factor loadings, expected returns, and the conditional CAPM

Adrian, Tobias; Franzoni, Francesco - 2008

We complement the conditional CAPM by introducing unobservable long-run changes in risk factor loadings. In this environment, investors rationally 'learn' the long-level of factor loadings from the observation of realized returns. As a direct consequence of this assumption, conditional betas are...

Persistent link: https://www.econbiz.de/10003966158

Funding liquidity risk and the cross-section of stock returns

Adrian, Tobias; Etula, Erkko M. - 2010

We derive equilibrium pricing implications from an intertemporal capital asset pricing model where the tightness of financial intermediaries’ funding constraints enters the pricing kernel. We test the resulting factor model in the cross-section of stock returns. Our empirical results show that...

Persistent link: https://www.econbiz.de/10008657196

The great carbon arbitrage

Adrian, Tobias; Bolton, Patrick; Kleinnijenhuis, Alissa M. - 2022

Persistent link: https://www.econbiz.de/10013431311