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Monetary policy and asset price overshooting: a rationale for the Wall/Main Street disconnect
Caballero, Ricardo J.; Simsek, Alp - 2022
We analyze optimal monetary policy and its implications for asset prices, when aggregate demand has inertia and responds to asset prices with a lag. If there is a negative output gap, the central bank optimally overshoots aggregate asset prices (asset prices are initially pushed above their...
Persistent link: https://www.econbiz.de/10013093040
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Pricing climate change risks : CAPM with rare disasters and stochastic probabilities
Karydas, Christos; Xepapadeas, Anastasios - 2019
these events. Using theory and simulations we study the implications of the imminent threat of climate change on different … that lead to these assets becoming stranded. Our result suggest that climate change implies a positive and increasing risk … risk. Transition risks lower substantially the participation of carbon intensive assets in the market portfolio, which …
Persistent link: https://www.econbiz.de/10011962146
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Pricing Climate Change Risks : CAPM with Rare Disasters and Stochastic Probabilities
Karydas, Christos; Xepapadeas, Anastasios - 2019
of these events. Using theory and simulations we study the implications of the imminent threat of climate change on … risk premium, with the overall equity premium depending on the volatility of the stochastic process that governs climate … change risk. Transition risks lower substantially the participation of carbon intensive assets in the market portfolio, which …
Persistent link: https://www.econbiz.de/10014108526
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What Moves Equity Markets? A Term Structure Decomposition for Stock Returns
Gonçalves, Andrei - 2020
Several papers decompose stock returns into cash flow and discount rate news to study equity market fluctuations. This paper develops and explores an alternative decomposition for stock returns based on the idea that equity volatility must come from variation in the present value of short- and...
Persistent link: https://www.econbiz.de/10012848221
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Unspanned stochastic volatility in the multi-factor CIR model
Filipović, Damir; Larsson, Martin; Statti, Francesco - 2017
cannot fully hedge volatility risk solely using a portfolio of bonds. While Collin-Dufresne and Goldstein (2002) showed that …
Persistent link: https://www.econbiz.de/10011761277
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Time variation in asset price response to macro announcements
Goldberg, Linda S.; Grisse, Christian - 2013
the level of policy rates at the time of the news release, and risk conditions: Government bond yields increase in … response to "good news," but less so when risk is elevated. Risk conditions matter since they can capture the effects of … objectives of central banks, and the effect of news announcements on the risk premium. …
Persistent link: https://www.econbiz.de/10009787494
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The Valuation of Inherent Return (Bitcoin, Gold, Oil) Vs. Fiat Return Assets (Stocks, Bonds) – A Common Principle
Van Erlach, Julian - 2022
their return. What is NOT factored is any measure of RISK or “risk premium”, or supply and demand “imbalances” – and yet …, the models perform extremely well empirically and theoretically using only public, real-time data. Adding risk and supply …
Persistent link: https://www.econbiz.de/10013405892
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Market fragility and the paradox of the recent stock-bond dissonance
Koulovatianos, Christos; Li, Jian; Weber, Fabienne - 2017
After the Lehman-Brothers collapse, the stock index has exceeded its pre-Lehman-Brothers peak by 36% in real terms. Seemingly, markets have been demanding more stocks instead of bonds. Yet, instead of observing higher bond rates, paradoxically, bond rates have been persistently negative after...
Persistent link: https://www.econbiz.de/10011760864
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Using a Mean Changing Stochastic Processes Exit-Entry Model for Stock Market Long-Short Prediction
Lleo, Sebastien; Zhitlukhin, Mikhail; Ziemba, William T. - 2021
Stochastic processes is one of the key operations research tools for analysis of complex phenomenon. This paper has a unique application to the study of mean changing models in stock markets. The idea is to enter and exit stock markets like Apple Computer and the broad S&P500 index at good times...
Persistent link: https://www.econbiz.de/10013220323
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Testing the stochastic disorder model on stock markets
Sokko, Anastasiia - 2017
This paper examines real-time applications of quickest disorder detection techniques for timing stock markets. The focus is on the stochastic disorder model by Shiryaev, Zhitlukhin, and Ziemba (2014, 2015), Zhitlukhin and Ziemba (2016) and their optimal stopping rule. The model uses sequential...
Persistent link: https://www.econbiz.de/10011875860