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Solving Stochastic Saddlepoint Systems: A Qualitative Treatment with Economic Applications

Miller, Marcus; Weller, Paul - C.E.P.R. Discussion Papers - 1989

We examine the effect of introducing stochastic shocks into a linear rational expectations model with saddlepoint …

Persistent link: https://www.econbiz.de/10005281381

Estimating probability distributions of future asset prices: empirical transformations from option-implied risk-neutral to real-world density functions

de Vincent-Humphreys, Rupert; Noss, Joseph - Bank of England - 2012

transform the risk-neutral density into a ‘real-world’ density that better reflect agents’ actual expectations. This work offers …

Persistent link: https://www.econbiz.de/10009024818

Asset Price Bubbles; A Selective Survey

Scherbina, Anna - International Monetary Fund (IMF) - 2013

Why do asset price bubbles continue to appear in various markets? This paper provides an overview of recent literature on bubbles, with significant attention given to behavioral models and rational models with frictions. Unlike the standard rational models, the new literature is able to model...

Persistent link: https://www.econbiz.de/10011242201

Unconventional Monetary Policy and Asset Price Risk

Roache, Shaun K.; Rousset, Marina V - International Monetary Fund (IMF) - 2013

We examine the effects of unconventional monetary policy (UMP) events in the United States on asset price risk using risk-neutral density functions estimated from options prices. Based on an event study including a key exchange rate, an equity index, and five commodities, we find that “tail...

Persistent link: https://www.econbiz.de/10010790292

U.S. Monetary Shocks and Global Stock Prices

Laeven, Luc; Tong, Hui - International Monetary Fund (IMF) - 2010

This paper studies how U.S. monetary policy affects global stock prices. We find that global stock prices respond strongly to changes in U.S. interest rate policy, with stock prices increasing (decreasing) following unexpected monetary loosening (tightening). This impact is more pronounced for...

Persistent link: https://www.econbiz.de/10008777010

Modeling expectations in agent-based models — An application to central bank's communication and monetary policy

Salle, Isabelle L. - In: Economic Modelling 46 (2015) C, pp. 130-141

Expectations play a major role in macroeconomic dynamics, especially regarding the conduct of monetary policy. Yet …, modeling the interplay between communication, expectations and aggregate outcomes remains a challenging task, mainly because … this requires deviation from the paradigm of rational expectations and perfect information. While agent-based macro models …

Persistent link: https://www.econbiz.de/10011208958

Strategy switching in the Japanese stock market

Yamamoto, Ryuichi; Hirata, Hideaki - In: Journal of Economic Dynamics and Control 37 (2013) 10, pp. 2010-2022

This paper investigates the expectation formation process of Japanese stock market professionals. By utilizing a monthly forecast survey dataset on the TOPIX distributed by QUICK Corporation, we sort forecasters into buy-side and sell-side professionals. We empirically demonstrate that the...

Persistent link: https://www.econbiz.de/10010871017

Martingale densities for general asset prices

Schweizer, Martin - University of Bonn, Germany

Persistent link: https://www.econbiz.de/10005028376

The Capital Asset Pricing Model as a General Equilibrium with Incomplete Markets

Geanakoplos, John; Shubik, Martin - Cowles Foundation for Research in Economics, Yale University - 1989

We recast the capital asset pricing model (CAPM) in the broader context of general equilibrium with incomplete markets … (GEI). In this setting we give proofs of three properties of CAPM equilibria: they are efficient, asset prices lie on a … depend on covariances, not variances. We extend CAPM to many consumption goods in such a way that all three properties hold …

Persistent link: https://www.econbiz.de/10005762656

Betting against beta

Frazzini, Andrea; Pedersen, Lasse Heje - In: Journal of Financial Economics 111 (2014) 1, pp. 1-25

We present a model with leverage and margin constraints that vary across investors and time. We find evidence consistent with each of the model's five central predictions: (1) Because constrained investors bid up high-beta assets, high beta is associated with low alpha, as we find empirically...

Persistent link: https://www.econbiz.de/10010718732