Download or read book Essays on Macro Factors and Asset Pricing written by and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Asset Pricing written by Sergiy Rakhmayil and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Asset Pricing Debt Valuation and Macroeconomics written by Ram Sai Yamarthy and published by . This book was released on 2017 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation consists of three chapters which examine topics at the intersection of financial markets and macroeconomics. Two of the sections relate to the valuation of U.S. Treasury and corporate debt while the third understands the role of banking frictions on equity markets.More specifically, the first chapter asks the question, what is the role of monetary policy fluctuations for the macroeconomy and bond markets? To answer this question we design a novel asset-pricing framework which incorporates a time-varying Taylor rule for monetary policy, macroeconomic factors, and risk pricing restrictions from investor preferences. By estimating the model using U.S. term structure data, we find that monetary policy fluctuations significantly impact inflation uncertainty and bond risk exposures, but do not have a sizable effect on the first moments of macroeconomic variables. Monetary policy fluctuations contribute about 20% to the variation in bond risk premia. Models with frictions in financial contracts have been shown to create persistence effects in macroeconomic fluctuations. These persistent risks can then generate large risk premia in asset markets. Accordingly, in the second chapter, we test the ability that a particular friction, Costly State Verification (CSV), has to generate empirically plausible risk exposures in equity markets, when household investors have recursive preferences and shocks occur in the growth rate of productivity. After embedding these mechanisms into a macroeconomic model with financial intermediation, we find that the CSV friction is negligible in realistically augmenting the equity risk premium. While the friction slows the speed of capital investment, its contribution to asset markets is insignificant. The third chapter examines how firms manage debt maturity in the presence of investment opportunities. I document empirically that debt maturity tradeoffs play an important role in determining economic fluctuations and asset prices. I show at aggregate and firm levels that corporations lengthen their average maturity of debt when output and investment rates are larger. To explain these findings, I construct an economic model where firms simultaneously choose investment, short, and long-term debt. In equilibrium, long-term debt is more costly than short-term debt and is only used when investment opportunities present themselves in peaks of the business cycle.

Download or read book Essays on Asset Pricing and Macro finance written by Jingwen Shi and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Asset Pricing written by Bosung Jang and published by . This book was released on 2017 with total page 140 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies how asset prices are related to various macroeconomic and financial factors. In the first chapter, I examine the influence of external financing costs on growth and asset prices. Using U.S. high-tech firm data and the aggregate financing cost measure of Eisfeldt and Muir (2016), I find that an increase in financing cost can have negative effects on R&D by reducing equity finance. This result suggests that financing cost can have substantial impacts on long-run productivity through the R&D channel. Motivated by this idea, I construct a general equilibrium model where financing costs affect innovation activities and future productivity. My model endogenously generates long-run risk and matches key features of macroeconomic and asset price data. The model produces a sizable equity premium, doing a good job of matching macro moments in the data. Furthermore, a large risk premium of R&D-intensive stocks is justified in the model as in the data. In addition, as a higher financing cost forecasts lower productivity growth in the model, this prediction is supported by empirical evidence. In the second chapter, I investigate whether heterogeneity between domestic and foreign households can help explain the cross-section of stock returns. For this analysis, I apply Yogo’s (2006) durable consumption model to a two-country setting using Korean stock market data. In Korea, U.S. investors have been a dominant foreign investor group, given that the total share of foreigners is considerably large. By incorporating the stochastic discount factor of the U.S. into the model, I find that it plays a significant role in pricing assets. In particular, our model is successful in accounting for the expected excess return of relatively high book-to-market equity groups, producing lower pricing errors than the Fama-French 3 factor model. In the third chapter, I study the effects of debt maturity choice on stock returns and financial structure. I construct a model where firms can issue both short-term and long-term bonds, subject to collateral constraints. I also assume that, when they run financial deficits, firms use equity finance paying issuance costs. The model performs well in matching empirical facts about stock returns and the financial structure of firms. In addition, the model provides an interesting implication that firms substitute between leverage and maturity. In the literature, theoretical explanations for the substitution relationship have been mainly based on conflicts between stakeholders. Without hinging on the contract-theoretic approach, my model replicates the theoretical prediction.

Download or read book Three Essays in Asset Pricing written by Alan Picard and published by . This book was released on 2015 with total page 165 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract This dissertation consists of three essays. My first paper re-examines the link between idiosyncratic risk and expected returns for a large sample of firms in both developed and emerging markets. Recent studies using Fama-French three factor models have shown a negative relationship between idiosyncratic volatility and expected returns for developed markets. This relationship has not been studied to date for emerging markets. This study relates the current-month’s idiosyncratic volatility to the subsequent month’s returns for a sample of both developed and emerging markets expanding benchmark factors by including both a momentum and a systematic liquidity risk component. My second essay contributes to the important literature on the topic of the small capitalization stocks historical outperformance over large capitalization stocks by investigating the hypothesis that the small firm premium is related to macroeconomic and financial variables and that relationship is driven by the economic cycle in the United States and Canada. More specifically, this study employs recent advances in nonlinear time series models to explore the relationship between the small firm premium, and financial and macroeconomic variables in the Canadian and U.S. economies. My third paper re-examines the findings of a recent research paper that suggested that market wide liquidity may act as a leading indicator to the economic cycle. Using several liquidity measures and various macroeconomic variables to proxy for the economic conditions, the paper presents evidence that stock market liquidity could forecast business cycles: A major decrease in the overall level of market liquidity could indicate weak economic growth in the subsequent months. However, the drawback in the analysis is that the relationship is investigated in a linear approach even though it has been proven that most macroeconomic variables follow non-linear dynamics. Employing similar liquidity measures and macroeconomic proxies, and two popular econometrics models that account for non-linear behavior, this study hence re-investigates the relationship between stock market liquidity and business cycles.

Download or read book Essays on Macro finance Asset Pricing Models and Estimation written by Kyu Ho Kang and published by . This book was released on 2010 with total page 108 pages. Available in PDF, EPUB and Kindle. Book excerpt: In my dissertation, I focus on theoretical asset pricing models and the development of Bayesian econometric methods to estimate them, particularly in the area of bond pricing. The first essay theoretically and empirically examines structural changes in a dynamic term-structure model of zero-coupon bond yields. To do this, we develop a new arbitrage-free one latent and two macro-economics factor affine model to price default-free bonds when all model parameters are subject to change at unknown time points. The bonds in our set-up can be priced straightforwardly once the change-point model is formulated as a specific unidirectional Markov process. We consider five versions of our general model - with 0, 1, 2, 3 and 4 change-points - to a collection of 16 yields measured quarterly over the period 1972:I to 2007:IV. Our empirical approach to inference is fully Bayesian with priors set up to reflect the assumption of a positive term-premium. The use of Bayesian techniques is particularly relevant because the models are high-dimensional and non-linear, and because it is more straightforward to compare our different change-point models from the Bayesian perspective. Our estimation results indicate that the model with 3 change-points is most supported by the data and that the breaks occurred in 1980:II, 1985:IV and 1995:II. These dates correspond (in turn) to the time of a change in monetary policy, the onset of what is termed the great moderation, and the start of technology driven period of economic growth. We also utilize the Bayesian framework to derive the out-of-sample predictive densities of the term-structure. We find that the forecasting performance of the 3 change-point model is substantially better than that of the other models we examine. In the second essay, we develop and estimate a model of the term structure of interest rates within the context of a Dynamic Stochastic General Equilibrium model. The model features multiple monetary policy and volatility regimes. We estimate this model by Bayesian methods. Our estimation results reveal that U.S. monetary policy has become ``more active'' since 1995:Q2, that during this period, the average term premium has fallen, and that the price of regime shift risk is always significantly positive over time. These findings highlight the important role that general equilibrium modeling can play in understanding the complex dynamics of the term structure.

Download or read book Essays on Macroeconomic Announcements and Asset Pricing written by Rory Joseph Ernst and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter of my thesis explores the correlation of asset pricing factor sensitivitiesbetween firms with important economic links. I find that firms’ factor sensitivities (betas) are significantly correlated with their customers’ respective betas. I further document this effect holds in the setting of firms in strategic alliances. The second chapter of my thesis is co-authored with Thomas Gilbert and Christopher Hrdlicka. It highlights a puzzle that one can earn more than 100% of the equity premium by trading on select macroeconomic announcement days identified by prior literature. We use day-of-the-month fixed effects to control for announcement clustering and find that macroeconomic announcements as a whole are responsible for about half of the equity premium. The third chapter of my thesis investigates the role of competition in the risk imposed on firms by organization capital. I find that firms in a spread portfolio of high-minus-low organization capital are significantly riskier only in the most competitive industries.

Download or read book Essays of Macroeconomic Risk and Asset Pricing written by Biley Adelphe Ekponon and published by . This book was released on 2018 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Asset Prices and Macroeconomic News Announcements written by John Cong Zhou and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation is composed of three chapters that are unified by their exploration of asset prices and macroeconomic news announcements. With respect to asset prices, my main focus is on the price discovery process: how do asset prices reveal information relevant for asset fundamentals? Through my research, I provide new answers to this question. My work gets at core issues in asset pricing: whether financial markets are informationally efficient; why some assets earn unconditionally high premia; and how the sensitivity of prices to information varies over time and across assets. Specifically, chapter one shows evidence that sophisticated traders with an informational advantage inefficiently impound their edge into the aggregate U.S. stock market and U.S. Treasury bonds. In chapter two, I explore a model in which investors are averse to ambiguity (Knightian uncertainty) to explain why the equity premium is concentrated around specific events. Finally, chapter three investigates how the Federal Reserve's zero lower bound affects the response of asset prices, in particular interest rates, to information. Each of the three chapters explores the price discovery process using the unique setting of U.S. macroeconomic news announcements, which are made by government agencies and private-sector organizations and cover macroeconomic data on inflation, output, and unemployment. Analyzing financial markets in this setting deepens our understanding of how asset prices reflect information about macroeconomic fundamentals. At the same time, the results have macroeconomic implications; for example, the assumptions of monetary policy models in theory and the effectiveness of unconventional monetary policy in practice.

Download or read book Essays in Macro finance written by Jiwei Zhang and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of four essays in macro-finance, focusing on the cause and effect of asset prices, inequality, and welfare. In particular, these essays highlight the role of institutions and structural changes in shaping outcomes of asset markets and of the macro-economy. The two overarching objectives of these essays are to analyze mechanisms of asset price movements and to understand how these asset price movements affect the daily lives of people. The four chapters of this dissertation examine the implications of inertia and stock market non-participation for equity prices, risk sharing, and wealth inequality; causal effects of Chinese Communist Party's cadre promotion system on land prices in China; interconnection between homeownership and marriage; fiscal responses to income inequality shocks. The first chapter quantifies the general equilibrium effects of financial innovation that increases access to equity markets. I study an overlapping generations model with both idiosyncratic and aggregate risk, solved with machine learning techniques. A benchmark economy with limited stock market participation and rebalancing frictions matches the current dynamics of macro aggregates, equity and bond returns, as well as wealth and portfolio concentration. A counterfactual experiment shows how widespread adoption of target date funds would improve risk sharing, reduce inequality, and generate substantial welfare gains for households in the bottom 90% of wealth distribution. The equity premium drops from 6.4% to 1.7%, while the standard deviation of equity returns stabilizes from 21.9% to 14.6%. Welfare implications vary with risk aversion and age. In general, the bottom 90% benefit from improved access to equity markets and better risk sharing, while the top 10% su↵er losses in wealth accumulation. Outcomes are very close between an economy with target date funds and one without any participation costs or rebalancing frictions. The second chapter identifies the causal effect of the Chinese Communist Party's performance- based promotion system to the country's real estate boom from 2003 to 2015. City-level leaders prioritizing economic growth allocate land at discounted prices to industrial firms rather than housing developers. Our analysis reveals that personal connections with provincial superiors are crucial for promotion and hence affect local land and housing supply. When city leaders share the same hometown as newly appointed provincial leaders, their chances of promotion increase by 15%, and GDP performances no longer matters. This connection reduces the need for industrial land allocation, resulting in a higher residential land supply in the city. In addition, cities with leaders who have hometown connections experience significantly higher supplies of residential land, and housing price growth rates are also 5% lower in these cities. The third chapter studies the phenomenon of marriage house in China and its effects on demo- graphics and homeownership. We first show empirical evidence for the complementarity between marriage and homeownership: single males with a marriage house (a house where the newlywed can move into) have 70% higher odds of getting married compared to their counterparts who do not have a marriage house. In addition, the timing of home purchase exhibits a clear cut-o↵ around the time of marriage, with the probability of purchasing a house peaking 0-2 years before marriage and slumping immediately after the time of marriage. Moreover, in the cross section, county house prices and average age at marriage are highly correlated in both level and in growth rate. We then quantify the marriage related incentives for homeownership using a lifecycle consumption-savings model with housing demand and ownership-dependent marriage shocks. In a counterfactual world where the marriage-house complementarity is absent, 45% of households under age 45 would delay their home purchases. Removing the marriage house friction from the marriage market would have slowed down the rise in age at first marriage by 40% between 1995 and 2010. Our results suggest that policies directed at either housing affordability or demographics can have significant consequences for both marriage and housing markets in China. Using data on U.S. state and federal taxes and transfers over the last quarter century, the fourth chapter estimates a regression model that yields the marginal effect of any shift of market income share from one quintile to another on the entire post tax, post-transfer income distribution. We identify exogenous income distribution changes and account for reverse causality using instruments based on exposure to international trade shocks, international commodity price shocks and national industry demand shocks, as well as lagged endogenous variables, with controls for the level of income, the business cycle and demographics. We find attenuation initially increases in quintile rank, peaks at the middle quintile and then falls for higher income quintiles, consistent with median voter political economy theory and the Stiglitz Director's law. We also provide evidence of considerable and systematic spillover effects on quintiles neither gaining nor losing in the "experiments, " also favoring the middle quintile. "Voting" and "income insurance" coalition analyses are presented. We find a strong negative relationship between average real income and the degree to which taxes and transfers are heavily redistributive.

Download or read book Essays on Empirical Asset Pricing written by Xiang Zhang and published by . This book was released on 2013 with total page 121 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three essays on empirical asset pricing around three themes: evaluating linear factor asset pricing models by comparing their misspecified measures, understanding the long-run risk on consumption-leisure to investigate their pricing performances on cross-sectional returns, and evaluating conditional asset pricing models by using the methodology of dynamic cross-sectional regressions. The first chapter is ̀̀Comparing Asset Pricing Models: What does the Hansen-Jagannathan Distance Tell Us?''. It compares the relative performance of some important linear asset pricing models based on the Hansen-Jagannathan (HJ) distance using data over a long sample period from 1952-2011 based on U.S. market. The main results are as follows: first, among return-based linear models, the Fama-French (1993) five-factor model performs best in terms of the normalized pricing errors, compared with the other candidates. On the other hand, the macro-factor model of Chen, Roll, and Ross (1986) five-factor is not able to explain industry portfolios: its performance is even worse than that of the classical CAPM. Second, the Yogo (2006) non-durable and durable consumption model is the least misspecified, among consumption-based asset pricing models, in capturing the spread in industry and size portfolios. Third, the Lettau and Ludvigson (2002) scaled consumption-based CAPM (C-CAPM) model obtains the smallest normalized pricing errors pricing gross and excess returns on size portfolios, respectively, while Santos and Veronesi (2006) scaled C-CAPM model does better in explain the return spread on portfolios of U.S. government bonds. The second chapter (̀̀Leisure, Consumption and Long Run Risk: An Empirical Evaluation'') uses a long-run risk model with non-separable leisure and consumption, and studies its ability to price equity returns on a variety of portfolios of U.S. stocks using data from 1948-2011. It builds on early work by Eichenbaum et al. (1988) that explores the empirical properties of intertemporal asset pricing models where the representative agent has utility over consumption and leisure. Here we use the framework in Uhlig (2007) that allows for a stochastic discount factor with news about long-run growth in consumption and leisure. To evaluate our long-run model, we assess its performance relative to standard asset pricing models in explaining the cross-section of returns across size, industry and value-growth portfolios. We find that the long-run consumption-leisure model cannot be rejected by the J-statistic and it does better than the standard C-CAPM, the Yogo durable consumption and Fama-French three-factor models. We also rank the normalized pricing errors using the HJ distance: our model has a smaller HJ distance than other candidate models. Our paper is the first, as far as we are aware, to use leisure data with adjusted working hours as a measure of leisure i.e., defined as the difference between a fixed time endowment and the observable hours spent on working, home production, schooling, communication, and personal care (Yang (2010)). The third essay: ̀̀Empirical Evaluation of Conditional Asset Pricing Models: An Economic Perspective'' uses dynamic Fama-MacBeth cross-sectional regressions and tests the performance of several important conditional asset pricing models when allowing for time-varying price of risk. It compares the performance of conditional asset pricing models, in terms of their ability to explain the cross-section of returns across momentum, industry, value-growth and government bond portfolios. We use the new methodology introduced by Adrian et al. (2012). Our main results are as follows: first we find that the Lettau and Ludvigson (2001) conditional model does better than other models in explaining the cross-section of momentum and value-growth portfolios. Second we find that the Piazessi et al. (2007) consumption model does better than others in pricing the cross-section of industry portfolios. Finally, we find that in the case of the cross-section of risk premia on U.S. government bond portfolios the conditional model in Santos and Veronesi (2006) outperforms other candidate models. Overall, however, the Lettau and Ludvigson (2001) model does better than other candidate models. Our main contributions here is using a recently developed method of dynamic Fama-MacBeth regressions to evaluate the performance of leading conditional CAPM (C-CAPM) models in a common set of test assets over the time period from 1951-2012.

Download or read book Essays in Macro Finance and Asset Pricing written by Amr Elsaify and published by . This book was released on 2017 with total page 266 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three parts. The first documents that more innovative firms earn higher risk-adjusted equity returns and proposes a model to explain this. Chapter two answers the question of why firms would choose to issue callable bonds with options that are always "out of the money" by proposing a refinancing-risk explanation. Lastly, chapter three uses the firm-level evidence on investment cyclicality to help resolve the aggregate puzzle of whether R&D should be procyclical or countercylical.

Download or read book Three Essays on Asset Pricing from the Macroeconomic Perspective written by and published by . This book was released on 2014 with total page 79 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Macroeconomic Risks and Stock Prices written by Fernando Manuel Duarte and published by . This book was released on 2011 with total page 159 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this thesis, I study the relationship between macroeconomic risks and asset prices. In the first chapter, I establish that inflation risk is priced in the cross-section of stock returns: stocks that have low returns during inflationary times command a risk premium. I estimate a market price of inflation risk that is comparable in magnitude to the price of risk for the aggregate market. Inflation is therefore a key determinant of risk in the cross-section of stocks. The inflation premium cannot be explained by either the Fama-French factors or industry effects. Instead, I argue the premium arises because high inflation lowers expectations of future real consumption growth. To formalize and test this hypothesis, I develop a consumption-based general equilibrium model. The model generates a price of inflation risk consistent with my empirical estimates, while simultaneously matching the joint dynamics of consumption and inflation, the aggregate equity premium, and the level and slope of the yield curve. In the second chapter, with L. Kogan and Dmitry Livdan, we study the relation between returns on the aggregate stock market and aggregate real investment. While it is well known that aggregate investment rate is negatively correlated with subsequent excess stock market returns, we find that it is positively correlated with future stock market volatility. Thus, conditionally on past aggregate investment, the mean-variance tradeoff in aggregate stock returns is negative. We interpret these patterns within a general equilibrium production economy. In our model, investment is determined endogenously in response to two types of shocks: shocks to productivity and preference shocks affecting discount rates. Preference shocks affect expected stock returns, aggregate investment rate, and stock return volatility in equilibrium, helping model reproduce the empirical relations between these variables. Thus, our results emphasize that the time-varying price of aggregate risk plays and important role in shaping the aggregate investment dynamics. In the third chapter, with S. Parsa, we show a novel relation between the institutional investors' intrinsic trading frequency-a commonly used proxy for the investors's investment horizon- and the cross-section of stock returns. We show that the 20% of stocks with the lowest trading frequency earn mean returns that are 6 percentage points per year higher than the 20% of stocks that have the highest trading frequency. The magnitude and predictability of these returns persist or even increase when riskadjusted by common indicators of systematic risks such as the Fama-French, liquidity or momentum factors. Our results show that the characteristics of stockholders affect expected returns of the very securities they hold, supporting the view that heterogeneity among investors is an important dimension of asset prices. JEL classification: E31, E44, G12

Download or read book Selected Essays in Empirical Asset Pricing written by Christian Funke and published by Springer DE. This book was released on 2008-06-26 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt: Christian Funke aims at developing a better understanding of a central asset pricing issue: the stock price discovery process in capital markets. Using U.S. capital market data, he investigates the importance of mergers and acquisitions (M&A) for stock prices and examines economic links between customer and supplier firms. The empirical investigations document return predictability and show that capital markets are not perfectly efficient.

Download or read book Essays in Asset Pricing written by Oliver Randall and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: