In this paper we ‘update’ the option implied probability of default (option iPoD) approach recently suggested in the literature. First, a numerically more stable objective function for the estimation of the risk neutral density is derived whose integrals can be solved analytically. Second,...

It is shown in this paper that the data augmentation technique undermines the theoretical underpinnings of the deviance information criterion (DIC), a widely used information criterion for Bayesian model comparison, although it facilitates parameter estimation for latent variable models via...

This paper reports on experimental tests of an instantiation of the Lucas asset pricing model with heterogeneous agents and time-varying private income streams. Central features of the model (infinite horizon, perishability of consumption, stationarity) present difficult challenges and require a...

It is known from the literature on the psychology of modes of behavior in stock markets that – besides other parameters – moods and emotions as personal influencing factors affect yield expectations and the risk-awareness of market participants. The constructs that may influence moods...

In order to explain equity returns, the single index model (which corresponds to the CAPM) was extended in various ways to multi-factor models. Following Chen/ Roll/Ross, macroeconomic variables are the favorites for the additional factors. Fama/French (1993–1998) use the return of specially...

It is a well-documented empirical fact that index option prices systematically differ from Black-Scholes prices. However, previous research provides inconclusive results whether the observed volatility smile could be explained by a discretetime dynamic model of stock returns with skewed,...

We analyze the extent to which shares of German enterprises are traded at foreign stock exchanges over time. We find that – after a considerable initial trading activity – the flowback effects to Germany gain in importance. Secondary quotations at foreign stock exchanges should broaden the...

Risk free asset demand in the classic portfolio problem is shown to decrease with income if and only if the consumer's uncertainty preferences over assets satisfy the preference condition that the risk free asset is more readily substituted for the risky asset as the quantity of the latter...

Ibrahim & Ong (2008) use operational restrictions of Islamic Investment Guidelines and conduct a thought experiment on Real Estate Investment Trusts (REITs) under restricted and non-restricted schemes. We use financial restriction and reach somewhat different results. Compliant REITs...

This article rejects the linkages in proposals that the Federal Reserve Bank (Fed) target equity prices. The real federal funds rate (RFF) and stock prices (SP) are uncorrelated; causality tests show a positive effect of SP on RFF and a negative effect of SP on RFF. These results occur as part of...