Download or read book Asset Pricing Habit Memory and the Labor Market written by Ivan Jaccard and published by . This book was released on 2010 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main contribution of this study is to develop a dynamic general equilibrium model linking financial markets to the real economy. In search of a unified framework, this study finds that a model with internal habit memory is able to generate asset pricing and business cycle predictions that are strongly supported by the data. In comparison to solutions present in the literature, the equity premium puzzle can be resolved in a model also able to explain the dynamics of hours worked and real wages. In addition, the proposed mechanism avoids the generation of excessive risk-free rate variations and amplifies the effects of technology shocks.

Download or read book Habit based Asset Pricing with Limited Participation Consumption written by Christian Bach and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A Behavioral Approach to Asset Pricing written by Hersh Shefrin and published by Elsevier. This book was released on 2008-05-19 with total page 636 pages. Available in PDF, EPUB and Kindle. Book excerpt: Behavioral finance is the study of how psychology affects financial decision making and financial markets. It is increasingly becoming the common way of understanding investor behavior and stock market activity. Incorporating the latest research and theory, Shefrin offers both a strong theory and efficient empirical tools that address derivatives, fixed income securities, mean-variance efficient portfolios, and the market portfolio. The book provides a series of examples to illustrate the theory. The second edition continues the tradition of the first edition by being the one and only book to focus completely on how behavioral finance principles affect asset pricing, now with its theory deepened and enriched by a plethora of research since the first edition

Download or read book Labor Based Asset Pricing written by Yukun Liu and published by . This book was released on 2019 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: I establish empirically and theoretically that expectations of returns and cash flows are linked to firms' labor search decisions. Using a dataset that covers the near-universe of online job vacancy postings, I show that vacancy rates negatively predict stock returns and positively predict cash flows in the cross-section of firms and industries. The predictive power of vacancy postings is strengthened for firms facing less favorable labor-market conditions. Incorporating the supply and demand information of the aggregate labor market, I construct a new measure of employment value that strongly predicts aggregate stock and bond market returns, even in the presence of other known predictors. A production-side asset pricing model that combines heterogeneous production decisions with varying firm labor-market conditions generates these empirical findings.

Download or read book Monthly Bulletin written by and published by . This book was released on 2010 with total page 220 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Consumption Based Asset Pricing Part 2 written by Douglas T. Breeden and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Following Part 1 of this article, which reviews late-1970s to 1990s classic derivations and tests of the consumption capital asset pricing model, here in Part 2 we review more recent developments, some of which are based on utility functions with non-time-separable preferences. Important second-generation consumption-based asset pricing advances are also reviewed, including models with habit formation and long-run risk. These models give large cyclical changes in relative risk aversion and risk premiums as well as lagged impacts of aggregate consumption changes on risk premiums. We review asset pricing with rare disasters and models focused on consumer spending on durables and real estate, as well as the fraction of spending financed by labor income. The second-generation models discussed have more free parameters and fit the empirical data better than did the first-generation consumption-based asset pricing models.

Download or read book The Capital Asset Pricing Model written by and published by Bookboon. This book was released on with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book An Empirical Investigation of Consumption based Asset Pricing Models with Stochastic Habit Formation written by Qiang Dai and published by . This book was released on 2011 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Pricing with Fading Memory written by Stefan Nagel and published by . This book was released on 2019 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: Building on evidence that lifetime experiences shape individuals' macroeconomic expectations, we study asset prices in an economy in which a representative agent learns with fading memory about unconditional mean endowment growth. With IID fundamentals, constant risk aversion, and memory decay calibrated to microdata, the model generates a high and strongly counter-cyclical objective equity premium, while the subjective equity premium is virtually constant. Consistent with this theory, experienced payout growth (a weighted average of past growth rates) is negatively related to future stock market excess returns and subjective expectations errors in surveys, and positively to analyst forecasts of long-run earnings growth.

Download or read book Land of Addicts written by Xiaohong Chen and published by . This book was released on 2004 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the ability of a general class of habit-based asset pricing models to match the conditional moment restrictions implied by asset pricing theory. We treat the functional form of the habit as unknown, and to estimate it along with the rest of the model's finite dimensional parameters. Using quarterly data on consumption growth, assets returns and instruments, our empirical results indicate that the estimated habit function is nonlinear, the habit formation is better described as internal rather than external, and the estimated time-preference parameter and the power utility parameter are sensible. In addition, the estimated habit function generates a positive stochastic discount factor (SDF) proxy and performs well in explaining cross-sectional stock return data . We find that an internal habit SDF proxy can explain a cross-section of size and book-market sorted portfolio equity returns better than (i) the Fama and French (1993) three-factor model, (ii) Lettau and Ludvigson (2001) scaled consumption CAPM model, (iii) an external habit SDF proxy, (iv) the classic CAPM, and (v) the classic consumption CAPM

Download or read book Land of Addicts An Empirical Investigation of Habit Based Asset Pricing Models written by Xiaohong Chen and published by . This book was released on 2005 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: A popular explanation of aggregate stock market behavior suggests that assets are priced as if there were a representative investor whose utility is a power function of the difference between aggregate consumption and a quot;habitquot; level, where the habit is some function of lagged and (possibly) contemporaneous consumption. But theory does not provide precise guidelines about the parametric functional relationship between the habit and aggregate consumption. This makes formal estimation and testing challenging; at the same time, it raises an empirical question about the functional form of the habit that best explains asset pricing data.This paper studies the ability of a general class of habit-based asset pricing models to match the conditional moment restrictions implied by asset pricing theory. Our approach is to treat the functional form of the habit as unknown, and to estimate it along with the rest of the model's finite dimensional parameters. This semiparametric approach allows us to empirically evaluate a number of interesting hypotheses about the specification of habit-based asset pricing models. Using stationary quarterly data on consumption growth, assets returns and instruments, our empirical results indicate that the estimated habit function is nonlinear, the habit formation is internal, and the estimated time-preference parameter and the power utility parameter are sensible. In addition, our estimated habit function generates a positive stochastic discount factor (SDF) proxy and performs well in explaining cross-sectional stock return data . We find that an internal habit SDF proxy can explain a cross-section of size and book-market sorted portfolio equity returns better than (i) the Fama and French (1993) three-factor model, (ii) the Lettau and Ludvigson (2001b) scaled consumption CAPM model, (iii) an external habit SDF proxy, (iv) the classic CAPM, and (v) the classic consumption CAPM.

Download or read book Land of Addicts An Empirical Investigation of Habit Based Asset Pricing Behavior written by Xiaohong Chen and published by . This book was released on 2010 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the ability of a general class of habit-based asset pricing models to match the conditional moment restrictions implied by asset pricing theory. We treat the functional form of the habit as unknown, and to estimate it along with the rest of the model's finite dimensional parameters. Using quarterly data on consumption growth, assets returns and instruments, our empirical results indicate that the estimated habit function is nonlinear, the habit formation is better described as internal rather than external, and the estimated time-preference parameter and the power utility parameter are sensible. In addition, the estimated habit function generates a positive stochastic discount factor (SDF) proxy and performs well in explaining cross-sectional stock return data . We find that an internal habit SDF proxy can explain a cross-section of size and book-market sorted portfolio equity returns better than (i) the Fama and French (1993) three-factor model, (ii) Lettau and Ludvigson (2001) scaled consumption CAPM model, (iii) an external habit SDF proxy, (iv) the classic CAPM, and (v) the classic consumption CAPM.

Download or read book Habit Formation Heterogeneity written by Eduard Dubin and published by . This book was released on 2012 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Habit Formation and Recursive Intertemporal Preference in Asset Pricing written by Eric Campbell Full Yet Lam and published by . This book was released on 2004 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Pricing with Endogenously Uninsurable Tail Risk written by Hengjie Ai and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies asset pricing and labor market dynamics in a setting in which idiosyncratic risk in human capital is not fully insurable. Firms use long-term contracts to provide insurance to workers, but neither side can fully commit; furthermore, owing to costly and unobservable retention effort, worker-firm relationships have endogenous durations. Uninsured tail risk in labor earnings arises as a part of an optimal risk-sharing scheme. In equilibrium, exposure to the tail risk generates higher aggregate risk premia and higher return volatility. Consistent with data, firm-level labor share predicts both future returns and pass-throughs of firm-level shocks to labor compensation.

Download or read book Essays in Asset Pricing and Labor Markets written by Mete Kilic and published by . This book was released on 2017 with total page 322 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first chapter, "Asset Pricing Implications of Hiring Demographics," I document that U.S. industries that shift their skilled workforce toward young employees exhibit higher expected equity returns. The young-minus-old (YMO) hiring return spread comoves negatively with value-minus-growth while being significantly positive on average. Exposure to the YMO spread accounts for a significant portion of annual momentum profits at the industry level. I find that an adjustment of the skilled workforce toward young employees is associated with greater productivity in new capital inputs of an industry. This motivates a risk-based explanation for the YMO spread, and its interaction with value and momentum. A model of investment and hiring where young and experienced employees are equipped with differential roles in production and investment can account for the empirical findings. The second chapter, "Risk, Unemployment, and the Stock Market: A Rare-Event-Based Explanation of Labor Market Volatility," co-authored with Jessica A. Wachter, answers the following questions: What is the driving force behind the cyclical behavior of unemployment and vacancies? What is the relation between job-creation incentives of firms and stock market valuations? Our model features time-varying risk, modeled as a small and variable probability of an economic disaster. A high probability implies greater risk and lower future growth, lowering the incentives of firms to invest in hiring. During periods of high risk, stock market valuations are low and unemployment rises. The model thus explains volatility in equity and labor markets, and the relation between the two.

Download or read book Habit persistence consumption based asset pricing and time varying expected returns written by Stig Vinther Møller and published by . This book was released on 2008 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: