In this article copula theory is used to analyze the co-movements between the Brazilian and American capital markets. To formulate an effective asset allocation strategy, it is important to understand extreme events – both positive (booms) and negative (crashes) – and their effects on...

The last 30 years saw substantial increases in wealth inequality and stock market participation, smaller increases in consumption inequality and the fraction of indebted households, a decline in interest rates and the expected equity premium, as well as a prolonged stock market boom. In an...

The equity premium puzzle is found during the test of the Consumption-based Capital Asset Pricing Model (CCAPM) with aggregate consumption data. Because of income disparity, many consumers lack financial assets to intertemporally allocate their consumptions under income constraints. Thus, it is...

We derive a discrete Log-Normal Asset Pricing Model (LAPM) based on log-normal distributed risky asset returns. Providing an analytical description of the efficient frontier in E(Log(R))-STD(Log(R)) space, we than show that under the log-normality of returns' assumption a segmented market...

The research on the consumption-based asset pricing theory is limited to the developed capital markets. This paper seeks to extend the research to the Chinese developing capital market. It analyzes the dynamic relationship between the Chinese residents consumption, stock market returns and...

Stock market anomalies have always attracted questions over the applicability of Capital Asset Pricing Model (CAPM) for being an efficient predictor of stock market returns. Roll (1977), Banz (1981), Bhandari (1988), Jagadeesh (1992), Lakonishok, Shleifer, and Vishney (1994), Arumugam (1996)...

With the aim of constructing predictive distributions for daily returns, we introduce a new Markov normal mixture model in which the components are themselves normal mixtures. We derive the restrictions on the autocovariances and linear representation of integer powers of the time series in...

Engle and Manganelli (2004) propose CAViaR, a class of models suitable for estimating conditional quantiles in dynamic settings. Engle and Manganelli apply their approach to the estimation of Value at Risk, but this is only one of many possible applications. Here we extend CAViaR models to...

This paper examines the degree of persistence in the volatility of financial time series using a Long Memory Stochastic Volatility (LMSV) model. Specifically, it employs a Gaussian semiparametric (or local Whittle) estimator of the memory parameter, based on the frequency domain, proposed by...