Jump Diffusion International Asset Pricing With Nontraded Consumption Goods PDF Download
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Author | : Jaeyoung Sung |
Publisher | : |
Total Pages | : 40 |
Release | : 2008 |
Genre | : |
ISBN | : |
Download Jump-Diffusion International Asset Pricing with Nontraded Consumption Goods Book in PDF, ePub and Kindle
We present a jump-diffusion international asset pricing model with stochastic exchange rates and inflation rates when investors consume both traded and nontraded goods. We argue that in general, the Adler-Dumas inflation rate differential may not fully capture PPP deviation risks, unless all volatilities, drift rates and jumps rates of PPP deviations/excchange rates are constant. The structure of optimal portfolios for investors from different countries reveals that country-specific demand for risky assets can arise from two sources of risks: PPP-deviation risks and nontraded-good-specific inflation-rate-differential risks. Consequently, equilibrium asset returns can be expressed in a multi-beta linear asset pricing model with a number of benchmark portfolios including hedge portfolios for PPP deviation risks and nontraded-good-specific inflation rate risks. The optimal portfolio structure further reveals that even if jump risks were added to otherwise pure diffusion assets in a no-jump world, investors' existing optimal portfolios of risky assets wouldn't change. We also note that risk premia on PPP deviation risks can be positive, zero, or even negative, that in the presence of inflation risks, hedging against exchange rate risks in isolation can sometimes make the investor's real wealth riskier than no hedging at all, and that a global investor optimally increases his consumption in both traded and nontraded goods as the price of the traded good of his own country increases.
Author | : Jin E. Zhang |
Publisher | : |
Total Pages | : 33 |
Release | : 2006 |
Genre | : Capital assets pricing model |
ISBN | : |
Download Asset Pricing Under Jump Diffusion Book in PDF, ePub and Kindle
Author | : Mr.José M. Barrionuevo |
Publisher | : International Monetary Fund |
Total Pages | : 46 |
Release | : 1993-02-01 |
Genre | : Business & Economics |
ISBN | : 1451843186 |
Download Asset Pricing in the International Economy Book in PDF, ePub and Kindle
This paper presents a statistical and economic interpretation of the low and often economically implausible risk aversion estimates obtained for fixed income assets throughout the finance literature. For a statistical interpretation, Monte Carlo simulations are used to demonstrate that specification errors introduce a serious downward bias in parameter estimates derived from the standard asset pricing model. For an economic interpretation, an international version of the asset pricing model is presented. The model suggests that by reducing the effect of country specific disturbances, an international measure of consumption growth yields more accurate risk aversion estimates than a national measure. The results of asset pricing tests suggest that risk aversion estimates derived from models constructed for the international measures are economically plausible and close to each other across eight industrialized economies. These results are robust for several asset returns.
Author | : Eric Bentzen |
Publisher | : |
Total Pages | : 16 |
Release | : 1992 |
Genre | : Capital assets pricing model |
ISBN | : |
Download The Intertemporal Capital Asset Pricing Model with Returns that Follow Poisson Jump-diffusion Processes Book in PDF, ePub and Kindle
Author | : Mary Tian |
Publisher | : |
Total Pages | : 115 |
Release | : 2011 |
Genre | : |
ISBN | : |
Download Essays in Asset Pricing and International Finance Book in PDF, ePub and Kindle
This thesis consists of three chapters in asset pricing and international finance. In Chapter 1, I examine the effect of tradability, the proportion of a firm's output that is exported, on its stock returns. The empirical patterns are consistent with the adjustment of the relative price of tradable to non-tradable goods, due to endowment shocks. I find firms that produce tradable goods have asset returns and earnings that are twice as cyclical as firms that produce non-tradable goods. A tradable minus nontradable portfolio of stock returns can predict changes in real exchange rates and the relative quantity of exports. A two-country endowment economy model formalizing the relative price mechanism is able to match the empirical facts. In Chapter 2, joint with Leonid Kogan and Roberto Rigobon, we take an openeconomy perspective on consumption growth predictability. We find that the combination of the U.S. and the world real interest rates predicts U.S. consumption growth. Predictability is highly significant, both statistically and economically, and is strongest at horizons of two to three years. The growth rate of consumption of services is more predictable than the growth rate of consumption of nondurable goods. We interpret this evidence using a two-country equilibrium exchange economy model and conclude that the predictive relation between interest rates and consumption growth is likely generated by output shocks in the non-tradable good sector. In Chapter 3, joint with Leonid Kogan, we examine the effects of data snooping on the performance of linear factor models at explaining asset pricing anomalies. We gather 22 anomalies established in the literature and create three-factor models from sorting firms into portfolios with respect to these anomalies. From 1950-2007, half of the factor models we construct can explain 31% or more of anomalies. In comparison, the CAPM and Fama French models rank in the 20th and 40th percentile of models respectively. Factors constructed from sorting by external financing characteristics (net stock issues and composite issuance) are able to explain a large proportion of anomalies. None of the models are able to explain momentum.
Author | : John H. Cochrane |
Publisher | : Now Publishers Inc |
Total Pages | : 117 |
Release | : 2005 |
Genre | : Business & Economics |
ISBN | : 1933019158 |
Download Financial Markets and the Real Economy Book in PDF, ePub and Kindle
Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Author | : Claus Munk |
Publisher | : Oxford University Press, USA |
Total Pages | : 598 |
Release | : 2013-04-18 |
Genre | : Business & Economics |
ISBN | : 0199585490 |
Download Financial Asset Pricing Theory Book in PDF, ePub and Kindle
The book presents models for the pricing of financial assets such as stocks, bonds, and options. The models are formulated and analyzed using concepts and techniques from mathematics and probability theory. It presents important classic models and some recent 'state-of-the-art' models that outperform the classics.
Author | : John H. Cochrane |
Publisher | : Princeton University Press |
Total Pages | : 560 |
Release | : 2009-04-11 |
Genre | : Business & Economics |
ISBN | : 1400829135 |
Download Asset Pricing Book in PDF, ePub and Kindle
Winner of the prestigious Paul A. Samuelson Award for scholarly writing on lifelong financial security, John Cochrane's Asset Pricing now appears in a revised edition that unifies and brings the science of asset pricing up to date for advanced students and professionals. Cochrane traces the pricing of all assets back to a single idea--price equals expected discounted payoff--that captures the macro-economic risks underlying each security's value. By using a single, stochastic discount factor rather than a separate set of tricks for each asset class, Cochrane builds a unified account of modern asset pricing. He presents applications to stocks, bonds, and options. Each model--consumption based, CAPM, multifactor, term structure, and option pricing--is derived as a different specification of the discounted factor. The discount factor framework also leads to a state-space geometry for mean-variance frontiers and asset pricing models. It puts payoffs in different states of nature on the axes rather than mean and variance of return, leading to a new and conveniently linear geometrical representation of asset pricing ideas. Cochrane approaches empirical work with the Generalized Method of Moments, which studies sample average prices and discounted payoffs to determine whether price does equal expected discounted payoff. He translates between the discount factor, GMM, and state-space language and the beta, mean-variance, and regression language common in empirical work and earlier theory. The book also includes a review of recent empirical work on return predictability, value and other puzzles in the cross section, and equity premium puzzles and their resolution. Written to be a summary for academics and professionals as well as a textbook, this book condenses and advances recent scholarship in financial economics.
Author | : Harold Kushner |
Publisher | : Springer Science & Business Media |
Total Pages | : 480 |
Release | : 2013-11-27 |
Genre | : Mathematics |
ISBN | : 146130007X |
Download Numerical Methods for Stochastic Control Problems in Continuous Time Book in PDF, ePub and Kindle
Stochastic control is a very active area of research. This monograph, written by two leading authorities in the field, has been updated to reflect the latest developments. It covers effective numerical methods for stochastic control problems in continuous time on two levels, that of practice and that of mathematical development. It is broadly accessible for graduate students and researchers.
Author | : Alan H. Gelb |
Publisher | : Oxford University Press |
Total Pages | : 376 |
Release | : 1988 |
Genre | : Business & Economics |
ISBN | : 9780195207743 |
Download Oil Windfalls Book in PDF, ePub and Kindle
This book assesses the full impact of oil windfalls on six developing producer countries - Algeria, Ecuador, Indonesia, Nigeria, Trinidad and Tobago, and Venezuela. This is the first time that the issue has been systematically analysed and related to economics policies and underlying macroeconomic characteristics. The book adopts a broad approach, blending institutional and political aspects with quantitative analysis which includes the results of sophisticated model simulations. It presents new information on how oil discoveries have been used by producer governments, and analyses of the consequences. Finally it concludes that much of the potential benefit to producers has been dissipated, and explains why producers may actually end up worse off despite revenue gains.