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Abstract I estimate a return distribution of an equity index from equity index option prices. I evaluate nonparametrically the option price function and a state price density at each 1-year return. Based on a model for dynamics of consumption growth and dividend growth, a real-world probability...
Persistent link: https://www.econbiz.de/10008461860
I estimate a return distribution of an equity index from equity index option prices. I evaluate nonparametrically the option price function and a state price density at each 1-year return. Based on a model for dynamics of consumption growth and dividend growth, a real-world probability density...
Persistent link: https://www.econbiz.de/10008461875
Persistent link: https://www.econbiz.de/10012805831
Persistent link: https://www.econbiz.de/10009853534
This study revisits the relation between firms' choices of debt maturity and their investment in a dynamic world. Prior research, including Myers (1977), suggests that financing with short-term debt resolves the underinvestment problem caused by debt financing. In contrast, I establish that...
Persistent link: https://www.econbiz.de/10012947644
In this study we examine the long term behavior of stock returns. The analysis reveals that negative autocorrelations of the returns exist for a super-long horizon as long as 10 years. This pattern, however, contrasts to predictions of previous stock price models which include random walks. We...
Persistent link: https://www.econbiz.de/10013147501
We structurally estimate an investment-based asset pricing model, where firms' exposure to macroeconomic risk is unknown. Bayesian beliefs about this parameter are updated from firms' and industry peers' comovement between their productivity and consumption growth. The model implies that...
Persistent link: https://www.econbiz.de/10013217161
Persistent link: https://www.econbiz.de/10003492431
In an asset-pricing model calibrated to match the standard asset pricing empirical properties -- in particular, the time-variation in the equity premium -- we calculate the value implications of sub-optimal capital budgeting decisions. Specifically, we calculate that an investment policy that...
Persistent link: https://www.econbiz.de/10012901043
I examine whether the time-varying cost of capital is considered in firms' capital budgeting decisions. For this test, I measure the conditional cost of equity, using individual equity option prices. I find that corporate investment responds negatively to fluctuations in the option-implied cost...
Persistent link: https://www.econbiz.de/10012853706