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Multifactor financial models are of great importance in analyzing practical asset prices. As an alternative to CAPM, Arbitrage Pricing Theory (APT), developed by Ross (1976), describes the expected returns on any financial asset with respect to macroeconomic factors. There are limited researches...
Persistent link: https://www.econbiz.de/10012012458
the literature by studying how to best model the time varying beta for REITs. We include several commonly used methods and ….S. equity REITs. Our results overwhelmingly suggest that the state space model is the best performer. Such a conclusion is … the cost of capital for the purpose of capital budgeting involving REITs, identifying equity REIT mispricing, evaluating …
Persistent link: https://www.econbiz.de/10011048940
Multifactor financial models are of great importance in analyzing practical asset prices. As an alternative to CAPM, Arbitrage Pricing Theory (APT), developed by Ross (1976), describes the expected returns on any financial asset with respect to macroeconomic factors. There are limited researches...
Persistent link: https://www.econbiz.de/10011985108
The no arbitrage conditions are derived in the explicit form for the market, where the zero coupons bonds of various maturities are accessible for the investors to draw up the portfolios. It is supposed, that the investor at any moment of time has a possibility to make the self-financed...
Persistent link: https://www.econbiz.de/10013156291
In this paper we test the hypotheses that previous studies fail to find a significant role for currency risk in industry returns because of methodological shortcomings or because of hedging. Using a Fama-French three-factor model augmented with an exchange rate factor in which both the factor...
Persistent link: https://www.econbiz.de/10012721899
Credit spreads are large, volatile and countercyclical, and recent empirical work suggests that risk premia, not expected credit losses, are responsible for these features. Building on the idea that corporate debt, while safe in ordinary recessions, is exposed to economic depressions, this paper...
Persistent link: https://www.econbiz.de/10010292117
A large literature attributes failure of uncovered interest rate parity (UIP) to the existence of a timevarying risk premium. This paper presents a mechanism in a simple two-country two-good endowment economy with incomplete markets that generates sizeable deviations from UIP. In a...
Persistent link: https://www.econbiz.de/10011412819
Based on the insight that risk exposure as quantified in the consumption based asset pricing model (CCAPM) is linearly proportional to the cash flow growth rate, we introduce a discounted cash flow model with a time-varying expected return structure matching the implicitly assumed risk exposure...
Persistent link: https://www.econbiz.de/10012487967
A large literature has related the failure of interest rate parity in the foreign exchange market to the existence of a time-varying risk premium. Nevertheless, most modern open economy DSGE models imply a (near) perfect interest rate parity condition. This paper presents a stylized two-country...
Persistent link: https://www.econbiz.de/10010757223
This paper presents a fully rational general equilibrium model that produces a time-varying exchange rate risk premium and solves the uncovered interest rate parity (U.I.P) puzzle. In this two-country model, agents are characterized by slow-moving external habit preferences similar to Campbell &...
Persistent link: https://www.econbiz.de/10005706175