Download or read book Measuring Market Expectations written by Christiane Baumeister and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asset prices are a valuable source of information about financial market participants' expectations about key macroeconomic variables. However, the presence of time-varying risk premia requires an adjustment of market prices to obtain the market's rational assessment of future price and policy developments. This paper reviews empirical approaches for recovering market-based expectations. It starts by laying out the two canonical modeling frameworks that form the backbone for estimating risk premia and highlights the proliferation of risk pricing factors that result in a wide range of different asset-price-based expectation measures. It then describes a key methodological innovation to evaluate the empirical plausibility of risk premium estimates and to identify the most accurate market-based expectation measure. The usefulness of this general approach is illustrated for price expectations in the global oil market. Then, the paper provides an overview of the body of empirical evidence for monetary policy and inflation expectations with a special emphasis on market-specific characteristics that complicate the quest for the best possible market-based expectation measure. Finally, it discusses a number of economic applications where market expectations play a key role for evaluating economic models, guiding policy analysis, and deriving shock measures.
Download or read book A New Approach to Measuring Market Expectations and Term Premia written by Xiaoxia Ye and published by . This book was released on 2017 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a novel approach to measure the market expectations and term premia in the term structure of interest rates. Key components of this approach are generic impact measures of state variables in a Gaussian dynamic term structure model. These measures are inherent in a particular state variable regardless of how other state variables are defined within the model. With the help of these measures, the approach gives rise to market expectations predicting yield changes well, and term premia having a legitimate impact on the forward curve. In the empirical analysis, I show the generic impact of the short rate on the yield curve, and historical dynamics of market expectations and term premia. The calibrated model is also employed to study the impacts of recent unconventional monetary policies.Updated term premium estimates are available at https://sites.google.com/site/wisesummer/Home/research/updated_data_for_ye-2015.
Download or read book Inflation Expectations written by Peter J. N. Sinclair and published by Routledge. This book was released on 2009-12-16 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.
Download or read book Measuring Monetary Policy Expectations from Financial Market Instruments written by Michael Joyce and published by . This book was released on 2012 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews the main instruments and associated yield curves that can be used to measure financial market participants' expectations of future UK monetary policy rates. We attempt to evaluate these instruments and curves in terms of their ability to forecast policy rates over the period from October 1992, when the United Kingdom first adopted an explicit inflation target, to March 2007. We also investigate several model-based methods of estimating forward term premia, in order to calculate risk-adjusted forward interest rates. On the basis of both in and out-of-sample test results, we conclude that, given the uncertainties involved, it is unwise to rely on any one technique to measure policy rate expectations and that the best approach is to take an inclusive approach, using a variety of methods and information.
Download or read book Behavioral Trading written by Woody Dorsey and published by Texere Publishing. This book was released on 2003 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dorsey, a publisher of market commentary since 1985, explains market semiotics, his market research philosophy based on the logic of behavioral finance. His proprietary market diagnosis techniques have been described as market expectations theory, behavioral finance, and contrary opinion analysis. Annotation ♭2004 Book News, Inc., Portland, OR (booknews.com).
Download or read book Measuring Monetary Policy Expectations from Financial Market Instruments written by Michael Joyce and published by . This book was released on 2008 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Literaturverz. S. 52 - 53.
Download or read book Market Based Measures of Monetary Policy Expectations written by Refet S. Gürkaynak and published by . This book was released on 2015 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: A number of recent papers have used different financial market instruments to measure near-term expectations of the federal funds rate and the high-frequency changes in these instruments around FOMC announcements to measure monetary policy shocks. This paper evaluates the empirical success of a variety of financial market instruments in predicting the future path of monetary policy. All of the instruments we consider provide forecasts that are clearly superior to those of standard time series models at all of the horizons considered. Among financial market instruments, we find that federal funds futures dominate all the other securities in forecasting monetary policy at horizons out to six months. For longer horizons, the predictive power of many of the instruments we consider is very similar. In addition, we present evidence that monetary policy shocks computed using the current-month federal funds futures contract are influenced by changes in the timing of policy actions that do not influence the expected course of policy beyond a horizon of about six weeks. We propose an alternative shock measure that captures changes in market expectations of policy over slightly longer horizons.
Download or read book Measuring Expectations in Options Markets written by Abel Rodriguez and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Extracting market expectations has always been an important issue when making national policies and investment decisions in financial markets. In option markets, the most popular way has been to extract implied volatilities to assess the future variability of the underlying with the use of the Black amp; Scholes formula. In this manuscript, we propose a novel way to extract the whole time varying distribution of the market implied asset price from option prices. We use a Bayesian nonparametric method that makes use of the Sethuraman representation for Dirichlet processes in order to take into account the evolution of probability distributions in time. As an illustration, we present the analysis of options on the Samp;P500 index.
Download or read book Measuring Monetary Policy Expectations from Finacial Market Instruments written by Michael A. S. Joyce and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Rational Expectations and Efficiency in Futures Markets written by Barry Goss and published by Routledge. This book was released on 2005-10-09 with total page 240 pages. Available in PDF, EPUB and Kindle. Book excerpt: Do traders in futures markets make use of all relevant information and is this reflected in prices? This collection of original essays by a team of international economists considers these and other questions central to futures markets.
Download or read book A General Approach to Recovering Market Expectations from Futures Prices with an Application to Crude Oil written by Christiane Baumeister and published by . This book was released on 2016 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: Futures markets are a potentially valuable source of information about price expectations. Exploiting this information has proved difficult in practice, because time-varying risk premia often render the futures price a poor measure of the market expectation of the price of the underlying asset. Although this expectation in principle may be recovered by adjusting the futures price by the estimated risk premium, a common problem is that there are as many measures of the market expectation as there are estimates of the risk premium. We propose a general solution to this problem that allows us to select the most accurate estimate of the expectation for any set of risk premium estimates. We illustrate this approach by solving the long-standing problem of how to estimate the market expectation of the price of crude oil. We provide a new measure of oil price expectations that is substantially more accurate than the alternatives and more economically plausible. Our analysis has implications for the estimation of economic models of energy-intensive durables, for oil price forecasting and for the measurement of oil price shocks.
Download or read book Market Expectations of Riskless Interest Rates written by Keith Brian Jarrett and published by . This book was released on 1985 with total page 291 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Price Expectations in Goods and Financial Markets written by François Gardes and published by Edward Elgar Publishing. This book was released on 2000 with total page 322 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economists and scholars in related fields discuss the concept of rationality of expectations from both a theoretical and an empirical point of view, and at both individual and collective levels. Concerning the first aspect, the book focuses on how agents collect and process information and how market opinion is formed. Concerning the second aspect, it presents studies based on individual price expectations and on the consensus revealed by survey data. Contributors analyze price expectations in a variety of markets, periods, and countries, paying special attention to financial markets which have represented the main field of study over the last ten years. Annotation copyrighted by Book News Inc., Portland, OR
Download or read book Market Expectations of Riskless Interest Rates written by Keith Brian Jarrett and published by . This book was released on 1985 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Extracting Market Expectations on Macroeconomic Announcements from Bond Prices written by Lars Jul Overby and published by . This book was released on 2009 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Event studies measuring the impact of macroenomic announcements rely on surveys as a measure of market expectations. However, these survey measures are noisy indicators of actual market expectations as they are collected with a time lag and not among actual market participants. Based upon a Hellwig (1980) type market microstructure model, a market-based survey measure is proposed that takes into account orderflow/price movements prior to release in order to capture changes in market expectations. The model is tested on US and German 10-year bond futures contracts for 8 US and German macroeconomic announcements and confirms the presence of expectation adjustments for the most important releases. Furthermore, the market-based survey measure captures the directionality of the surprise better than the standard Bloomberg survey measure.
Download or read book Measuring Monetary Policy Expectations written by Vijay A. Murik and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We evaluate the accuracy of the fixed-income market in pricing for future movements in monetary policy. Yields implied by market pricing on various fixed-income securities are regressed on returns on the cash rate over corresponding periods. Where the market pricing is subject to risk premia, instrumental variables are used to strip away the effects of the risk premia as if they were measurement errors. When we apply our framework to Australian fixed-income pricing from 2004 to 2010, we find that, consistent with findings in the extant literature, the market is quite effective in forecasting cash rate movements over horizons of up to six months. Beyond that horizon, the presence of risk premia diminishes to a large extent the signal on expectations in market pricing, but our instrumental variables framework suggests, nonetheless, that there is important information in fixed-income market pricing regarding expected cash rate movements over the one to three-year horizon.
Download or read book Market Expectations and Option Prices written by Martin Mandler and published by Boom Koninklijke Uitgevers. This book was released on 2003-04-17 with total page 244 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book surveys and summarizes the numerous approaches used to extract information on market expectations from option prices. The various approaches are thoroughly explained and many practical issues are discussed, including: data selection, data preparation, and presentation and interpretation of results. This enables the reader to easily implement these techniques in his own applied work. Most studies concerning uncertainty in financial markets focus on actual uncertainty as represented by historical volatility measures, variances etc. In contrast, using option prices allows us to study uncertainty in expectations, i.e. to take a forward looking perspective. In some applications we study how ECB-council meetings affect uncertainty in money market expectations. Most interesting among our results is a number of event studies which compare how uncertainty in market participants’ expectations reacts to anticipated and unanticipated results of ECB-council meetings.
