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| Author | : Mariano (Max) Massimiliano Croce |
| Publisher | : |
| Total Pages | : 57 |
| Release | : 2012 |
| Genre | : |
| ISBN | : |
Download Investor Information, Long-Run Risk, and the Term Structure of Equity Book in PDF, ePub and Kindle
We study the role of information in asset pricing models with long-run cash flow risk. When investors can distinguish short- from long-run consumption risks (full information), the model generates a sizable equity risk premium only if the equity term structure slopes up, contrary to the data. In general, the short- and long-run components are unidentified. We propose a sparsity-based bounded rationality model of long-run risk that is both parsimonious and fully identified from historical data. In contrast to full information, the model generates a sizable market risk premium simultaneously with a downward sloping equity term structure, as in the data.
| Author | : Mariano M. Croce |
| Publisher | : |
| Total Pages | : |
| Release | : 2007 |
| Genre | : |
| ISBN | : |
Download Investor Information, Long-Run Risk, and the Term Structure of Equity Book in PDF, ePub and Kindle
We study the role of information in asset pricing models with long-run cash flow risk. When investors can distinguish short- from long-run consumption risks (full information), the model generates a sizable equity risk premium only if the equity term structure slopes up, contrary to the data. In general, the short- and long-run components are unidentified. We propose a sparsity-based bounded rationality model of long-run risk that is both parsimonious and fully identified from historical data. In contrast to full information, the model generates a sizable market risk premium simultaneously with a downward sloping equity term structure, as in the data.
| Author | : Mariano M. Croce |
| Publisher | : |
| Total Pages | : 44 |
| Release | : 2007 |
| Genre | : Assets (Accounting) |
| ISBN | : |
Download Investor Information, Long-run Risk, and the Duration of Risky Cash-flows Book in PDF, ePub and Kindle
We study the role of information in asset pricing models with long-run cash flow risk. To illustrate the importance of the information structure, we show how the implications of the long-run risk paradigm for the cross-sectional properties of stock returns and cash flow duration are affected by information. When investors can fully distinguish short- and long- run consumption risk components of dividend growth innovations (full information), only exposure to long-run consumption risk generates significant risk premia, implying that high-return value stocks are long-duration assets, contrary to the historical data. By contrast, when investors observe the change in consumption and dividends each period but not the individual components of that change (limited information), exposure to short-run risk can generate large risk premia, so that high-return value stocks are short-duration assets while low-return growth stocks are long-duration assets, as in the data. We also show that, in order to explain empirical finding that long-horizon equity is less risky than short-horizon equity, the properties of the cash flow model and the values of primitive preference parameters must be quite different from those emphasized in the existing long-run risk literature.
| Author | : Mariano (Max) Massimiliano Croce |
| Publisher | : |
| Total Pages | : 59 |
| Release | : 2012 |
| Genre | : |
| ISBN | : |
Download Investor Information, Long-Run Risk, and the Duration of Risky Cash Flows Book in PDF, ePub and Kindle
We study the role of information in asset pricing models with long-run cash flow risk. To illustrate the importance of the information structure, we show how the implications of the long-run risk paradigm for the cross-sectional properties of stock returns and cash flow duration are affected by information. When investors can fully distinguish short- and long-run consumption risk components of dividend growth innovations (full information), only exposure to long-run consumption risk generates significant risk premia, implying that high-return value stocks are long-duration assets, contrary to the historical data. By contrast, when investors observe the change in consumption and dividends each period but not the individual components of that change (limited information), exposure to short-run risk can generate large risk premia, so that high-return value stocks are short-duration assets while low-return growth stocks are long-duration assets, as in the data. We also show that, in order to explain empirical finding that long-horizon equity is less risky than short-horizon equity, the properties of the cash flow model and the values of primitive preference parameters must be quite different from those emphasized in the existing long-run risk literature.
| Author | : Bradford Cornell |
| Publisher | : John Wiley & Sons |
| Total Pages | : 248 |
| Release | : 1999-05-26 |
| Genre | : Business & Economics |
| ISBN | : 9780471327356 |
Download The Equity Risk Premium Book in PDF, ePub and Kindle
Das Thema Risikoprämie für Aktien (Equity Risk Premium) wird hier zum ersten Mal verständlich erklärt. Die Risikoprämie für Aktien stellt einen Renditeausgleich dar für das erhöhte Risiko, das ein Anleger bei der Investition in Aktien eingeht, im Vergleich zu einer Investition in risikofreie Staatsanleihen. Die Risikoprämie ist zwar von der Theorie her einfach, jedoch in der Praxis ein sehr komplexes Phänomen. Für Finanzentscheidungen ist es von größter Bedeutung, daß man das Prinzip der Risikoprämie versteht und es anwenden kann. Cornell erläutert das Thema Schritt für Schritt sehr anschaulich und ohne terminologischen Ballast. Zunächst wird die Risikoprämie im Zusammenhang mit der Geschichte des Aktienmarktes betrachtet. Der Haussemarkt der 90er dient dabei als Fallstudie. Cornell zeigt, welche Rückschlüsse man durch die Analyse der Risikoprämie im historischen Verlauf für den Aktienmarkt ziehen kann, z.B. ob Aktienkurse steigen oder fallen oder ob sich der Aktienmarkt verändert. Vorausschauende Schätzungen der Risikoprämie werden anhand verschiedener konkurrierender Modelle analysiert, wobei die Vorzüge der jeweiligen Methode mitbewertet werden. 'Equity Risk Premium' ist das erste Buch, das dieses wichtige Prinzip der Risiko-Nutzen-Analyse erschöpfend behandelt. Es vermittelt einen tiefen Einblick und deckt alle Grundlagen ab, damit Investoren fundierte Finanzentscheidungen treffen können. Ein absolutes Muß für institutionelle Anleger, Geldmanager und Finanzvorstände, die auf eine fundierte Marktanalyse zurückgreifen müssen. (06/99)
| Author | : Ravi Bansal |
| Publisher | : |
| Total Pages | : 35 |
| Release | : 2019 |
| Genre | : Assets (Accounting) |
| ISBN | : |
Download The Term Structure of Equity Risk Premia Book in PDF, ePub and Kindle
We use traded equity dividend strips from U.S., Europe, and Japan from 2004-2017 to study the slope of the term structure of equity dividend risk premia. In the data, a robust finding is that the term structure of dividend risk premia (growth rates) is positively (negatively) sloped in expansions and negatively (positively) sloped in recessions. We develop a consumption-based regime switching model which matches these robust data-features and the historical probabilities of recession and expansion regimes. The unconditional population term structure of dividend-risk premia in the regime-switching model, as in standard asset pricing models (habits and long-run risks), is increasing with maturity. The regime-switching model also features a declining average term structure of dividend risk-premia if recessions are over-represented in a short sample, as is the case in the data sample from Europe and Japan. In sum, our analysis shows that the empirical evidence in dividend strips is entirely consistent with a positively sloped term structure of dividend risk-premia as implied by standard asset pricing models.
| Author | : Rajnish Mehra |
| Publisher | : Elsevier |
| Total Pages | : 635 |
| Release | : 2011-08-11 |
| Genre | : Business & Economics |
| ISBN | : 0080555853 |
Download Handbook of the Equity Risk Premium Book in PDF, ePub and Kindle
Edited by Rajnish Mehra, this volume focuses on the equity risk premium puzzle, a term coined by Mehra and Prescott in 1985 which encompasses a number of empirical regularities in the prices of capital assets that are at odds with the predictions of standard economic theory.
| Author | : William N. Goetzmann |
| Publisher | : Oxford University Press |
| Total Pages | : 568 |
| Release | : 2006-11-16 |
| Genre | : Business & Economics |
| ISBN | : 0199881979 |
Download The Equity Risk Premium Book in PDF, ePub and Kindle
What is the return to investing in the stock market? Can we predict future stock market returns? How have equities performed over the last two centuries? The authors in this volume are among the leading researchers in the study of these questions. This book draws upon their research on the stock market over the past two dozen years. It contains their major research articles on the equity risk premium and new contributions on measuring, forecasting, and timing stock market returns, together with new interpretive essays that explore critical issues and new research on the topic of stock market investing. This book is aimed at all readers interested in understanding the empirical basis for the equity risk premium. Through the analysis and interpretation of two scholars whose research contributions have been key factors in the modern debate over stock market perfomance, this volume engages the reader in many of the key issues of importance to investors. How large is the premium? Is history a reliable guide to predict future equity returns? Does the equity and cash flows of the market? Are global equity markets different from those in the United States? Do emerging markets offer higher or lower equity risk premia? The authors use the historical performance of the world's stock markets to address these issues.
| Author | : Ravi Bansal |
| Publisher | : |
| Total Pages | : 53 |
| Release | : 2011 |
| Genre | : |
| ISBN | : |
Download Long Run Risks and Equity Returns Book in PDF, ePub and Kindle
We argue that investor concerns about the exposure of asset returns to permanent movements in consumption levels are a key determinant of the risk and return relation in asset markets. We show that as the investment horizon increases, (i) the return's systematic risk exposure (consumption beta) almost converges to the long-run relation between dividends and consumption, (ii) return volatility is increasingly dominated by dividend shocks. We find that most of the differences in risk premia, at short and long horizons, is due to the heterogeneity in the exposure to permanent risks in consumption. The long-run cross-sectional relation between risk and return provides a measure of the compensation for permanent risks in consumption. We find that the market compensation for these risks is large relative to that for transitory movements in consumption.
| 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.
