Essays on Consumption and Asset Pricing Puzzles
Author | : 王高文 |
Publisher | : |
Total Pages | : 119 |
Release | : 2003 |
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Author | : 王高文 |
Publisher | : |
Total Pages | : 119 |
Release | : 2003 |
Genre | : |
ISBN | : |
Author | : |
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This thesis contributes to the literature on the consumption-portfolio choice under uncertainty and is motivated by several empirical failures of the standard consumption-based capital asset pricing model (CCAPM). This canonical model has proven disappointing empirically and has even been questioned whether it is theoretically valuable and practically useful even if it is in some sense the only model we have. The frustration is due to that the model performs no better in practice and generates some well-known consumption puzzles and asset pricing puzzles. The purpose of the thesis is to reexamine these puzzles and then to resolve them. After the debate of Hansen and Singleton (1983) and Hall (1988), the estimates of the elasticity of intertemporal substitution (EIS) of consumption in a representative agent model have not resulted in any consensus. Based on this observation, the first chapter of this thesis is focused on resolving the elasticity puzzle or the unresponsiveness to interest rates. We propose a new theoretical and empirical perspective on the relationship between consumption growth and asset returns. In the spirit of Hansen and Singleton (1983), we demonstrate that observed growth rate of consumption responds not only to a specific asset return but also to other asset returns. Empirically, US postwar quarterly data are used to fit the regression model derived in the chapter, and the sample period is 1953Q2-2001Q2. Empirical results show that the EIS is greater than 0.1, the maximum value considered possible by Hall (1988). Accordingly, we argue that there is no elasticity puzzle in the standard representative agent model. The second chapter provides an explanation for the puzzle of excess sensitivity of consumption to expected income proposed by Flavin (1981). We exploit consumer's superior information (i.e., windfalls in investments and in income) to integrate the consumption Euler equations into a generalized Euler equation. The implications emerging f.
Author | : Federico Gavazzoni |
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Total Pages | : 0 |
Release | : 2012 |
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Author | : Jeon-Hyeok Cho |
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Total Pages | : 282 |
Release | : 1991 |
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Release | : 2008 |
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Author | : Mark William Clements |
Publisher | : |
Total Pages | : 532 |
Release | : 2015 |
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In the first chapter, Christian Goulding and I present a model of asset prices with recursive preferences and the simple consumption growth dynamics of Mehra and Prescott (1985) but relax the assumption that preference parameters are constant over time. We show that rare, temporary, and plausible fluctuations in the elasticity of inter-temporal substitution (EIS) and risk aversion (RA) can quantitatively explain numerous regularities in U.S. asset prices including: the equity premium and risk-free rate puzzles, excess return and consumption growth predictability, a counter-cyclical risk premium and an upward-sloping real yield curve. A novel implication is that time-varying EIS is more important than time-varying RA for explaining many of these regularities, suggesting a new source of risk in investors' ability to plan their consumption over long horizons. In addition, our model can accommodate a behavioral interpretation of psychological factors (e.g. fear) that drive fluctuations in asset prices beyond traditional risk factors.
Author | : Hugo Alejandro Garduño Arredondo |
Publisher | : |
Total Pages | : 324 |
Release | : 2008 |
Genre | : Investments |
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Author | : Qi Li |
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Total Pages | : 132 |
Release | : 2004 |
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Author | : St?phane Chr?tien |
Publisher | : LAP Lambert Academic Publishing |
Total Pages | : 136 |
Release | : 2012-02 |
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ISBN | : 9783846583357 |
Many financial models are evaluated using the stochastic discount factor (SDF) approach because of its simplicity, flexibility and universality. The two essays of this work exploit these characteristics to re-examine two long-standing asset pricing topics: consumption-based and performance measurement models. The first essay develops a methodology to understand and compare the sources of pricing errors in models based on SDF moments. The method allows a new investigation of preference-based explanations of the risk-free rate, term premium and risk premium puzzles. The second essay presents a method to measure performance evaluation by developing bounds on admissible performance measures that are free from inference errors. The bounds are furthermore used in ranking mutual funds and as a diagnostic instrument for evaluating candidate performance measures. Each essay carefully establishes the empirical relevancy of the proposed methodologies. These extensions of the SDF framework provide important new insights and have numerous finance applications for academic researchers and practitioners.
Author | : Dongna Zhang |
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Total Pages | : |
Release | : 2019 |
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