Download or read book Essays on Finance Learning and Macroeconomics written by Joseph Buchman Doyle (Jr.) and published by . This book was released on 2012 with total page 198 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of four essays on finance, learning, and macroeconomics. The first essay studies whether learning can explain why the standard consumption-based asset pricing model produces large pricing errors for U.S. equity returns. I prove that under learning standard moment conditions need not hold in finite samples, leading to pricing errors. Simulations show that learning can generate quantitatively realistic pricing errors and a substantial equity risk premium. I find that a model with learning is not rejected in the data, producing pricing errors that are statistically indistinguishable from zero. The second essay (co-authored with Anna Mikusheva) studies the properties of the common impulse response function matching estimator (IRFME) in settings with many parameters. We prove that the common IRFME is consistent and asymptotically normal only when the horizon of IRFs being matched grows slowly enough. We use simulations to evaluate the performance of the common IRFME in a practical example, and we compare it with an infrequently used bias corrected approach, based on indirect inferences. Our findings suggest that the common IRFME performs poorly in situations where the sample size is not much larger than the horizon of IRFs being matched, and in those situations, the bias corrected approach with bootstrapped standard errors performs better. The third essay (co-authored with Ricardo Caballero) documents that, in contrast with their widely perceived excess return, popular carry trade strategies yield low systemicrisk- adjusted returns. In contrast, hedging the carry with exchange rate options produces large returns that are not a compensation for systemic risk. We show that this result stems from the fact that the corresponding portfolio of exchange rate options provides a cheap form of systemic insurance. The fourth essay shows that the documented overbidding in pay-as-you-go auctions relative to a static model can be explained by the presence of a small subset of aggressive bidders. I argue that aggressive bidding can be rational if users are able to form reputations that deter future competition, and I present empirical evidence that this is the case. In auctions without any aggressive bidders, there is no evidence of overbidding in PAYGA.

Download or read book Essays on Learning Information and Expectations in Macroeconomics and Finance written by Gene Ambrocio and published by . This book was released on 2015 with total page 123 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation focuses on learning and expectations formation in Macroeconomics and Finance and the role of information production in shaping macroeconomic fluctuations. The first chapter provides a theory of information production to explain two features of modern business cycles. In my theory information is produced along two dimensions, a pro-cyclical quantitative margin and a counter-cyclical qualitative margin, that generates both slow recoveries and episodes of "rational exuberance" where optimistic booms tend to end in crises. The second chapter provides supporting evidence for the proposed cyclical variation in private information production using term loan data in the United States. Finally, the third chapter documents biases in terms of over-optimism and overconfidence in forecasts of real GDP growth from the survey of professional forecasters in the United States.

Download or read book Essays in Macroeconomics Corporate Finance and Social Learning written by Andrew C. P. Hertzberg and published by . This book was released on 2004 with total page 118 pages. Available in PDF, EPUB and Kindle. Book excerpt: (Cont.) the release of information until the long-term results of the firm are realized. In equilibrium, when the belief about the aggregate state is high, managers will be given short-term incentives, delaying the release of information. When the belief about the aggregate state is low, long-term incentives will be prevalent and information will be released without delay. This produces asymmetric learning dynamics for the economy, with gradual booms and rapid recessions. In a boom the belief about the aggregate state increases, information is pushed off into the future, and learning is slow. In a recession the belief is falling, triggering a switch to long-term incentives, that brings forward the release of information and accelerates learning. Chapter 2 presents a model of corporate misreporting in an environment where investors have heterogeneous beliefs and short sale constraints. The disagreement between investors provides a motive for agents who start a firm to limit the amount of information which it releases to the public so as to sponsor speculation over its value. This incentive to limit information is stronger when the heterogeneity of beliefs among investors is stronger. Investors also learn about a firm's expected profitability from the information released by other firms in the industry. I show that this creates a strategic complementarily in the precision of information released by each firm. This can give rise to multiple equilibria: one in which all firms release precise reports and one in which their reports are inaccurate ...

Download or read book Macroeconomics Finance and Money written by Giuseppe Fontana and published by Springer. This book was released on 2010-03-11 with total page 363 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume focuses on current issues of debate in the area of modern macroeconomics and money, written from (a broadly interpreted) post Keynesian perspective. The papers connect with Philip Arestis' contributions to macroeconomics and money, and pay tribute to his distinguished career.

Download or read book Essays on Adaptive Learning in Macroeconomics and Finance written by Martin Lettau and published by . This book was released on 1994 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Macroeconomics and International Finance written by Tilahun Molla Emiru and published by . This book was released on 2020 with total page 156 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Theoretical and Empirical Models of Macroeconomics and Finance written by Ali R. Bagherpour and published by . This book was released on 2018 with total page 85 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation presents two chapters on empirical models of macroeconomics and finance, and one chapter on a theoretical model for conducting monetary policy. The first chapter applies machine learning algorithms to construct non-parametric, nonlinear predictions of mortgage loan default. I compile a large dataset with over 20 million loan observations from Fannie Mae and Freddie Mac, for the period 2001-2016 at the quarterly frequency. Different machine learning algorithms are applied to predict in sample (training sample), and to forecast out-of-sample (testing data). I find that the forecast performance of nonlinear and non-parametric algorithms are substantially better than the traditional logit model. Additionally, machine learning algorithms allow identification of the predictive power of specific variables. The results indicate that loan age is the most important predictor of loan default before and after the 2008 financial crisis. However, I find that market loan- to-value is the most effective predictor of mortgage loan default during the recent financial crisis. Finally, I use machine learning to formulate risk-based capital stress tests for Fannie Mae and Freddie Mac under different scenarios. I forecast their mortgage credit losses and associated capital needs during the financial crises. The results obtained are more accurate than those from the Federal Housing Enterprise Oversights (OFHEO), and other existing stress test studies. In the second, and third chapters, I tested the effectiveness of Monetary policy by empirical, and theoretical models. With the severity of the 2008 financial crisis, and apparent inefficacy of traditional monetary and fiscal policies, the Federal Reserve together with the U.S. government introduced unconventional policy measures. The Large Scale Asset Purchase (LSAP) and Troubled Asset Relief Program (TARP) are some of these policies introduced by the Federal Reserve and Department of Treasury. While these policies may have been important in preventing a deepening of the financial crisis and laying the foundation for the economic recovery, there were collateral effects on bank profitability. In this chapter, I study the impact of both the LSAP and TARP programs on banks? profit and risk taking using a large panel. The results indicate that these programs had a positive effect on banks? profit (Chapter 2). In chapter three, I use a small-scale DSGE model for the economy of Iran to analyze monetary policy. The model is extended to include housing and oil sectors. The model is adapted for the peculiarities of Iran's Central Bank, which uses money supply as a function of oil income and production growth. I study the reaction function of the model to technology, oil, and monetary shocks in this specific Iranian monetary policy framework. The results show that monetary shocks has only nominal effect on inflation but not on the real sector such as investment, consumption, or production. Also, positive oil income shocks lead to an increase in inflation instead of an increase in production.

Download or read book Essays in International Finance and Macroeconomics written by Eiji Fujii and published by . This book was released on 1999 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: Each of the three essays composing this dissertation investigates important economic and econometric issues in international finance and macroeconomics. The first essay, “Market Structure and the Persistence of Sectoral Deviations from Purchasing Power Parity,” examines the relationship between market structure and the persistence of the dollar-based sectoral real exchange rates for fourteen OECD countries. The empirical results based on disaggregated data suggest that differences in market structure significantly determine the rates at which deviations from sectoral purchasing power parity decay. Based on the findings, I argue that an imperfectly competitive market structure is an important source of the well-documented persistence in real exchange rates.

Download or read book Essays on Banking Financial Markets and Macroeconomics written by Zhao Yang and published by . This book was released on 2013 with total page 141 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Public Policy and Financial Economics from a Macroeconomics Perspective written by Dung Nguyen and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: ABSTRACT: This dissertation consists of three essays. The first two essays (i.e., Chapter 2 and Chapter 3) examine the effects of raising the retirement age on the life cycle behaviors of individuals and its implication on the social security budget. The third essay (i.e., Chapter 4) is an empirical study, which tests the hypothesis of investors' overreactions when trading neglected stocks. The first essay examines the impact of raising the retirement age on the saving and working behaviors of older individuals, and the associated impact on the social security budget. Its results indicate that the reform would result in a 50% reduction in the social security budget deficit. In terms of behavioral responses, we find that: (1) individuals respond to the reform by saving more progressively during the period prior to retirement (i.e., from their early 40s to age 62), while supplying more working hours during the retirement period (i.e., ages 62 and older). The intensity of the saving and working hour responses critically depend on the assumption of the efficiency indexes of the elderly- the lower (higher) the efficiency index, the more intense the saving (working hours) response; (2) there is an upward shift in the working hour profile of individuals as a result of raising the retirement age. Once again, the distance of the shift increases with values of the elderly efficiency index; (3) we find a decrease in the participation rate of elderly individuals age 62-80 in versions where the estimated efficiency index of the elderly is relatively low. The second essay focuses on examining the life-cycle behavior responses of individuals with different skill levels to the raising of the retirement age reform. We find that individuals with different educational attainment respond differently to the reform. Specifically, individuals with lower-than-average education respond to the policy change with a significant upward shift in the working hour profile, a higher participation rate, and an aggressive retirement saving motive. On the other hand, individuals with higher-than-average education mainly deal with the policy change by a higher saving rate and/or a lower rate of decumulating their assets in the retirement period. More importantly, the participation rate in the retirement period among these individuals is actually lower than before the policy change. Secondly, our findings suggest that disadvantaged individuals (e.g., those with a low education level) are the ones who are heavily affected by the policy reform in terms of a bigger consumption reduction, a more intense labor supply response, and a higher contribution to the social security budget. Finally, we find a small increase in the average labor productivity associated with the policy change. However, by educational attainment, we find evidence which suggests a decrease in labor productivity among individuals with below-average educational attainment (i.e., those with a high school degree or lesser), and an increase in labor productivity among those with above-average educational attainment (i.e., those with a college degree or higher). The third essay is an empirical study, which tests the hypothesis of investors' overreaction when trading stocks with limited information, such as neglected stocks. Specifically, we design a fundamental scoring method (called NSCORE) and apply it to the neglected stock universe. We also apply this method to the most-watched stock universe (called WSCORE). Our results show that the annualized returns of a monthly-rebalancing investment strategy which buys the top 100 NSCORE and sells the bottom 100 NSCORE is 26.31% for the period from the beginning of 1985 to the end of 2009. By contrast, when applying the same screening method to the most-watched stocks universe during the same time period, the annualized returns of the same investment strategy dropped to about half. This evidence clearly demonstrates the effectiveness of using financial statement data to identify winners and losers among neglected stocks as a result of investors' overreaction. We also find that the returns difference between top and bottom neglected stocks tends to persist for a long time. Specifically, the return difference between the top 100 NSCORE and the bottom 100 NSCORE can last up to 36 months (3 years). On the other hand, the returns difference among most watched-stocks tends to generally disappear after 12 months (1 year). Our comprehensive sensitivity tests confirm that our findings are not subject to well-known anomalies such as the size, book-to-market, and illiquidity effects.

Download or read book Essays in Macroeconomics and Household Finance written by and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in International Finance and Macroeconomics written by Rafael Antonio Portillo and published by . This book was released on 2006 with total page 342 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on International Finance and Macroeconomics written by Young Ju Kim and published by . This book was released on 2014 with total page 127 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two studies on International finance and macroeconomics. Each study addresses different topics. The first study exploits Speculators' positions in futures markets to forecast exchange rates. The forecasting model we propose combines Engel and Hamilton's (1990) point that exchange rates follow long swings with Evans and Lyons' (2004) finding that privately available information about market participants' order flow can predict exchange rates over the short-run. We extract speculators' private information by fitting a microfounded autoregressive Markov regime switching model to the speculators'net positions data in the Commitment-of-Traders report and forecasting the speculators' mode of accumulation. We then use this predicted mode to form both directional and point exchange rate forecasts for the six most traded currency pairs. Over forecasting horizons ranging from 6 to 12 months, we evaluate the performance of our forecasts vis-a-vis the random walk. The results indicate that our forecasts are significantly better than those from random walk models for most currencies, except the Swiss Franc. The second study investigates on the sources of macroeconomic fluctuations in emerging economies. I compare the performance of the Aguiar and Gopinath (2007) model with that of the encompassing model which combines shocks to trend growth with interest rate shocks and financial frictions. Exploiting the recent developments in the theory and implementation of Bayesian methods, I estimate two models using Korea's data over the same sample period as in Aguiar and Gopinath (2007), and Chang and Fernandez (2010). In addition, I explore the role of the transitional dynamics in the estimation results. My findings are contrary to those from existing studies. The magnitude of permanent shocks is much larger than that of transitory shocks and the frictionless stochastic trend model delivers closer a match to the moments calculated from the data.

Download or read book Three Essays on Macroeconomic and International Finance Issues written by Unja Chae and published by . This book was released on 2005 with total page 288 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Finance and Macroeconomics written by Cynthia Mei Balloch and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation studies the impact of banks on macroeconomic outcomes. Chapter 1 explores the effects of bond market growth on the financing decisions of firms, the lending behavior of banks, and the resulting equilibrium allocation of credit and capital. This chapter makes three contributions to understand the impact of bond market liberalization. First, using evidence from reforms in Japan that gave borrowers selective access to bond markets during the 1980s, it shows that firms that obtained access to the bond market used bond issuance to pay back bank debt. More importantly, this large, positive funding shock led banks to increase lending to small and medium enterprises and real estate firms. Second, it proposes a model of financial frictions that is consistent with the empirical findings, and uses the model to derive general conditions under which bond liberalization has this effect on banks. The model predicts that bond liberalization can significantly worsen the quality of the pool of bank borrowers, and so lower bank profitability.

Download or read book Essays in Finance and Macroeconomics written by Pedram Jahangiry and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Rethinking Expectations written by Roman Frydman and published by Princeton University Press. This book was released on 2013-01-23 with total page 441 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book originated from a 2010 conference marking the fortieth anniversary of the publication of the landmark "Phelps volume," Microeconomic Foundations of Employment and Inflation Theory, a book that is often credited with pioneering the currently dominant approach to macroeconomic analysis. However, in their provocative introductory essay, Roman Frydman and Edmund Phelps argue that the vast majority of macroeconomic and finance models developed over the last four decades derailed, rather than built on, the Phelps volume's "microfoundations" approach. Whereas the contributors to the 1970 volume recognized the fundamental importance of according market participants' expectations an autonomous role, contemporary models rely on the rational expectations hypothesis (REH), which rules out such a role by design. The financial crisis that began in 2007, preceded by a spectacular boom and bust in asset prices that REH models implied could never happen, has spurred a quest for fresh approaches to macroeconomic analysis. While the alternatives to REH presented in Rethinking Expectations differ from the approach taken in the original Phelps volume, they are notable for returning to its major theme: understanding aggregate outcomes requires according expectations an autonomous role. In the introductory essay, Frydman and Phelps interpret the various efforts to reconstruct the field--some of which promise to chart its direction for decades to come. The contributors include Philippe Aghion, Sheila Dow, George W. Evans, Roger E. A. Farmer, Roman Frydman, Michael D. Goldberg, Roger Guesnerie, Seppo Honkapohja, Katarina Juselius, Enisse Kharroubi, Blake LeBaron, Edmund S. Phelps, John B. Taylor, Michael Woodford, and Gylfi Zoega.