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On the power and weakness of rational expectations: Logical fallacies, periodic bubbles and business cycles

Gracia, Eduard - 2012

's q ratio displays regular cycles of bubbles and crashes reflecting an agency problem between investors and producers. The …

Persistent link: https://www.econbiz.de/10010309044

Bubbles and Experience: An Experiment on Speculation

Dufwenberg, Martin; Lindqvist, Tobias; Moore, Evan - 2003

We investigate experimentally how the share of experienced traders in double-auction asset markets affects trading, in particular the occurrence of bubble-crash pricing patterns. In each session, six subjects trade in three successive market rounds and gain experience. In a fourth round,...

Persistent link: https://www.econbiz.de/10010320151

On the existence and prevention of asset price bubbles

Enders, Zeno; Hakenes, Hendrik - 2010

We develop a model of rational bubbles based on the assumptions of unknown market liquidity and limited liability of … condition for whether rational bubbles are possible. Based on this analysis, we discuss several widely-discussed policy measures … with respect to their effectiveness in preventing bubbles. A reduction of manager bonuses or a Tobin tax can create or …

Persistent link: https://www.econbiz.de/10010286704

Local adaptive multiplicative error models for high-frequency forecasts

Härdle, Wolfgang Karl; Hautsch, Nikolaus; Mihoci, Andrija - 2012

We propose a local adaptive multiplicative error model (MEM) accommodating timevarying parameters. MEM parameters are adaptively estimated based on a sequential testing procedure. A data-driven optimal length of local windows is selected, yielding adaptive forecasts at each point in time....

Persistent link: https://www.econbiz.de/10010330969

Equity premium prediction: Are economic and technical indicators instable?

Baetje, Fabian; Menkhoff, Lukas - 2015

We show that technical indicators deliver economic value in predicting the U.S. equity premium. A crucial element of this value stems from the stability of return predictability over the full sample period from 1950 to 2013. Results tentatively improve over time and beat alternatives over...

Persistent link: https://www.econbiz.de/10011301675

Multiplicative models of financial returns and what we fail to get when they are disregarded

Apreda, Rodolfo - 2011

This paper puts forward an alternative approach to multiplicative models and their assessment of returns out of financial assets. Firstly, it lays down an operative definition but also sets forth a commutative framework of mappings to provide foundations to such a definition. Next, the total...

Persistent link: https://www.econbiz.de/10010323109

Economic Valuation of Liquidity Timing

Karstanje, Dennis; Sojli, Elvira; Tahm, Wing Wah; van … - 2013

This paper conducts a horse-race of different liquidity proxies using dynamic asset allocation strategies to evaluate the short-horizon predictive ability of liquidity on monthly stock returns. We assess the economic value of the out-of-sample power of empirical models based on different...

Persistent link: https://www.econbiz.de/10010326356

Option-implied information and predictability of extreme returns

Vilkovz, Grigory; Xiaox, Yan - 2013

We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...

Persistent link: https://www.econbiz.de/10010327807

Which beta is best? On the information content of option-implied betas

Baule, Rainer; Korn, Olaf; Saßning, Sven - 2013

Option-implied betas are a promising alternative to historical beta estimators, because they are inherently forward-looking and can incorporate new information immediately and fully. Recently, different implied beta estimators have been developed in previous literature, but very little is known...

Persistent link: https://www.econbiz.de/10010328874

How effective are sovereign bond-backed securities as a spillover prevention device?

Cronin, David; Dunne, Peter G. - 2018

Brunnermeier et al. (2017) propose the introduction of sovereign bond-backed securities (SBBS) in the euro area. That and other papers assess how the securitisation would insulate senior bond holders from actual default-related losses. This paper generalises the assessment by using the VAR-based...

Persistent link: https://www.econbiz.de/10011984849

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