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On the Evolutionary Stability of Rational Expectations
Parke, William R.; Waters, George A. - 2011
Evolutionary game theory provides a fresh perspective on the prospects that agents with heterogeneous expectations might eventually come to agree on a single expectation corresponding to the efficient markets hypothesis. We establish conditions where agreement on a unique forecast is stable, but...
Persistent link: https://www.econbiz.de/10009351490
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An Evolutionary Game Theory Explanation of ARCH Effects
Parke, William R - 2017
While ARCH/GARCH equations have been widely used to model financial market data, formal explanations for the sources of … conditional volatility are scarce. This paper presents a model with the property that standard econometric tests detect ARCH … expectations are the driving force leading to the appearance of ARCH/GARCH in the data …
Persistent link: https://www.econbiz.de/10012947305
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On the Evolutionary Stability of Rational Expectations
Parke, William R - 2017
Evolutionary game theory provides a fresh perspective on the prospects that agents with heterogeneous expectations might eventually come to agree on a single expectation corresponding to the efficient markets hypothesis. We establish conditions where agreement on a unique forecast is stable, but...
Persistent link: https://www.econbiz.de/10012947307
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Equilibrium selection under different learning modes in supermodular games
Kaarbøe, Oddvar M.; Tieman, Alexander F. - 1999
We apply the dynamic stochastic framework proposed by recent evolutionaryliterature to the class of strict supermodular games when two simplebehavior rules coexist in the population, imitation and myopic optimization.We assume that myopic optimizers are able to see how well their payoff...
Persistent link: https://www.econbiz.de/10011302143
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Rtadf: Testing for Bubbles with EViews
Caspi, Itamar - Volkswirtschaftliche Fakultät, … - 2013
This paper presents Rtadf (Right Tail Augmented Dickey-Fuller), an EViews Add-in that facilitates the performance of time series based tests that help detect and date-stamp asset price bubbles. Detection strategy is based on a right-tail variation of the standard Augmented Dickey-Fuller (ADF)...
Persistent link: https://www.econbiz.de/10011112946
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The variance risk premium and fundamental uncertainty
Conrad, Christian; Stürmer, Karin - 2015 - This version: February 24, 2015
We propose a new measure of the expected variance risk premium that is based on a forecast of the conditional variance from a GARCH-MIDAS model. We find that the new measure has strong predictive ability for future U.S. aggregate stock market returns and rationalize this result by showing that...
Persistent link: https://www.econbiz.de/10010484829
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The law of one price in equity volatility markets
Van Tassel, Peter - 2020
This paper documents law of one price violations in equity volatility markets. While tightly linked by no-arbitrage restrictions, the prices of VIX futures exhibit significant deviations relative to their option-implied upper bounds. Static arbitrage opportunities occur when the prices of VIX...
Persistent link: https://www.econbiz.de/10012391498
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Sunspots and predictable asset returns
Challe, Edouard - Université Paris-Dauphine (Paris IX) - 2004
This paper uses a stylised asset-pricing model to show that sunspots may cause asset returns to be predictable, a widely documented feature of many speculative markets. This result parallels and extends previous works showing that sunspots render asset prices excessively volatile.
Persistent link: https://www.econbiz.de/10010905155
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Getting the Most out of Macroeconomic Information for Predicting Stock Returns and Volatility
Cakmakli, Cem; Dijk, Dick van - Tinbergen Instituut - 2010
This paper documents that factors extracted from a large set of macroeconomic variables bear useful information for predicting monthly US excess stock returns and volatility over the period 1980-2005. Factor-augmented predictive regression models improve upon both benchmark models that only...
Persistent link: https://www.econbiz.de/10011256330
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Getting the Most out of Macroeconomic Information for Predicting Stock Returns and Volatility
Cakmakli, Cem; Dijk, Dick van - Tinbergen Institute - 2010
This paper documents that factors extracted from a large set of macroeconomic variables bear useful information for predicting monthly US excess stock returns and volatility over the period 1980-2005. Factor-augmented predictive regression models improve upon both benchmark models that only...
Persistent link: https://www.econbiz.de/10008740266