Download or read book Essays on the Term Structure of Interest Rates and Long Run Variance of Stock Returns written by Ting Wu and published by . This book was released on 2010 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: In Chapter 1, I propose a term structure model based on risk-sensitive preferences. Following Hansen and Sargent (2008), I model a risk-sensitive consumer who shows aversion to uncertainties, and evaluates his utility using the max-min utility function. He considers three types of uncertainties: (a) uncertainty of future states; (b) uncertainty about current states; and (c) uncertainty about the model generating the data. I use a parameter to represent his aversion to the each uncertainty. The max-min utility function implies multiplicative adjustments to the standard pricing kernel.

Download or read book Essays on the Term Structure of Interest Rates written by Nisha Aroskar and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This dissertation contributes to the study of the term structure of interest rates by addressing some of the gaps in this literature. The term structure is an important channel of monetary transmission. It also contains information about the intertemporal choices made by economic agents. The expectations Hypothesis is the primary explanation in economics that links short term interest rates to long term interest rates. In the first essay I extend the literature by examining the expectations hypothesis in the newly developed financial markets. I find that the expectations theory is not rejected in these markets. This evidence is in sharp contrast to the evidence earlier presented for industrialized countries. Further, contrary to the simple expectations theory, the term premium has high persistence, which is reflected in significantly autoregressive error terms. The evidence also supports the longstanding suggestion that the term premium could be related to the liquidity in the economy. The next essay investigates the forecasting ability of the term spread for future output growth. There appears to be a sharp decline in the predictive power of the term spread in countries that have adopted monetary policy with a stronger response to inflation. To explore the underlying economic reasons for these findings, I explicitly model the information content of the term spread for future output growth based on a structural model. Model calibrations suggest that the forecasting ability of the term spread changes with a change in the persistence and the variance of the underlying economic shocks and in the monetary policy preferences. The last essay focuses on the term structure as a link between short term and long term interest rates in macroeconomic models. I integrate the New Keynesian model and the model of the term structure based on the Intertemporal Consumption Asset Pricing Model. This is a more plausible description of the economy compared to the earlier models. In this model, output responds to an interest rate that includes a time varying term premium which, in turn is associated with economic agents expectations about the future economic variables. Empirical results provide confidence for future research in this direction.

Download or read book Essays on the Term Structure of Interest Rates and Long run Risks written by Henrik Hasseltoft and published by . This book was released on 2009 with total page 184 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on the Term Structure of Interest Rates written by Lance Alexander Fisher and published by . This book was released on 1988 with total page 392 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Stock Returns and the Term Structure written by John Y. Campbell and published by . This book was released on 1985 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is well known that in the postwar period stockreturns have tended to be low when the short term nominal interest rate is high. In this paper I show that more generally the state of the term structure of interest rates predicts stock returns. Risk premia on stocks appear to move closely together with those on 20-year Treasury bonds, while risk premia on Treasury bills move somewhat independently. Average returns on 20-year bonds have been very low relative to average returns on stocks. I use these observations to test some simple asset pricing models. First I consider latent variable models in which betas are constant and risk premia vary with expected returns on a small number of unobservable hedge portfolios. The data strongly reject a single-latent-variable model. The last part of the paper examines the relationship between conditional means and variances of returns on bills, bonds and stocks. Bill returns tend to be high when their conditional variance is high, but there is a perverse negative relationship between stock returns and their conditional variance. A model is estimated which assumes that asset returns are determined by their time-varying betas with a fixed-weight "benchmark" portfolio of bills, bonds and stocks, whose return is proportional to its conditional variance. This portfolio is estimated to place almost all its weight on bills, indicating that uncertainty about nominal interest rates is important in pricing both short- and long-term assets

Download or read book Essays on the Volatility of the Term Structure of Interest Rates written by Miguel A. Ferreira and published by . This book was released on 2000 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Term Structure of Interest Rates with Short Run and Long Run Risks written by Olesya V. Grishchenko and published by . This book was released on 2017 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt: Interest rate variance risk premium (IRVRP), the difference between implied and realized variances of interest rates, emerges as a strong predictor of Treasury bond returns of maturities ranging between one and ten years for return horizons up to six months. IRVRP is not subsumed by other predictors such as forward rate spread or equity variance risk premium. These results are robust in a number of dimensions. We rationalize our findings within a consumption-based model with long-run risk, economic uncertainty, and inflation non-neutrality. In the model interest rate variance risk premium is related to short-run risk only, while standard forward-rate-based factors are associated with both short-run and long-run risks in the economy. Our model qualitatively replicates the predictability pattern of IRVRP for bond returns.

Download or read book Essays on the Term Structure of Interest Rates written by Wei Shi and published by . This book was released on 1995 with total page 198 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Modelling and forecasting stock return volatility and the term structure of interest rates written by Michiel de Pooter and published by Rozenberg Publishers. This book was released on 2007 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of a collection of studies on two areas in quantitative finance: asset return volatility and the term structure of interest rates. The first part of this dissertation offers contributions to the literature on how to test for sudden changes in unconditional volatility, on modelling realized volatility and on the choice of optimal sampling frequencies for intraday returns. The emphasis in the second part of this dissertation is on the term structure of interest rates.

Download or read book Stock Market Fluctuations and the Term Structure written by Chunsheng Zhou and published by . This book was released on 1996 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on the Term Structure of Interest Rates written by Hyoung-Seok Lim and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: Three chapters focus on the term structure of interest rates. Most Central Banks have recently employed the short term interest rate as a monetary policy instrument in the form of either a Taylor rule or Inflation Targeting. Under this framework, the term structure of interest rates play an important role in determining the effectiveness of monetary policy because economic decisions are based on long-term interest rates. The first two chapters discuss the role of the term structure of interest rates in explaining the behavior of exchange rates. Chapter 1 constructs a theoretical model and Chapter 2 provides an empirical result to supporting this theoretical prediction. Chapter 3 directly estimates the term structure of interest rates from Korean data. The estimated yield curves are used to extract market expectations about the future interest rates path which is essential for forward-looking monetary policy.

Download or read book Essays on the Term Structure of Interest Rates and the Pricing of Equity Options written by Sadayuki Ono 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 The Term Structure of Interest Rates in a Simple Stochastic Growth Model written by David Kim and published by . This book was released on 1998 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on the Dynamic Interaction of Expectations Monetary Policy and the Term Structure of Interest Rates written by Albert Lee Chun and published by . This book was released on 2007 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on the Term Structure of Interest Rates written by Basma Z. Bekdache and published by . This book was released on 1994 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on the term structure of interest rates written by Peter R. MacMillan and published by . This book was released on 1994 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Term Structure of Interest Rates and Macro Portfolio Returns written by Paul A. Bekker and published by . This book was released on 2011 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper presents an arbitrage-free yield model based on macro-portfolio dynamics. Apart from a level factor, detrended portfolio values serve as factors for the yield model. Using trend-balanced portfolios and parameters in terms of the instantaneous mean-variance frontier, risk premia and yield curve dynamics are modeled in a natural, integrated, parsimonious way. Positivity constraints on parameters and factors are formulated that guarantee the model is well posed. In an empirical analysis a four-factor model is applied to daily US Treasury yields. We estimate by quasi-maximum likelihood using the unscented Kalman filter. The model fits well, while the estimates of both parameters and factors satisfy the positivity constraints. The analysis reveals a strong link between business cycle variation in yields and risk premia.