Download or read book Multifactor Consumption Based Asset Pricing Models Using the US Stock Market as a Reference written by John Hunter and published by . This book was released on 2014 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we extend the time series analysis to the panel frame-work to test the C-CAPM driven by wealth references for developed countries. Speciጿically, we focus on a linearised form of the Consumption-based CAPM in a pooled cross section panel model with two-way error components. The empirical fiijndings of this two-factor model with various speciጿications all indicate that there is signiጿicant unobserved heterogeneity captured by cross-country ጿixed effects when consumption growth is treated as a common factor, of which the average risk aversion coefficient is 4.285. However, the cross-sectional impact of home consumption growth varies dramatically over the countries, where unobserved heterogeneity of risk aversion can also be addressed by random effects.

Download or read book Multifactor Consumption Based Asset Pricing Models Using the US Stock Market as a Reference written by John Hunter 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 Multifactor Consumption Based Asset Pricing Model of the UK Stock Market written by John Hunter and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A Comparison of Multi factor Asset Pricing Models Using US Stock Market Data written by Pia Grammig and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book An Empirical and Theoretical Analysis of Capital Asset Pricing Model written by Mohammad Sharifzadeh and published by Universal-Publishers. This book was released on 2010-11-18 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt: The problem addressed in this dissertation research was the inability of the single-factor capital asset pricing model (CAPM) to identify relevant risk factors that investors consider in forming their return expectations for investing in individual stocks. Identifying the appropriate risk factors is important for investment decision making and is pertinent to the formation of stocks' prices in the stock market. Therefore, the purpose of this study was to examine theoretical and empirical validity of the CAPM and to develop and test a multifactor model to address and resolve the empirical shortcomings of the single-factor CAPM. To verify the empirical validity of the standard CAPM and of the multifactor model, five hypotheses were developed and tested against historical monthly data for U.S. public companies. Testing the CAPM hypothesis revealed that the explanatory power of the overall stock market rate of return in explaining individual stock's expected rates of return is very weak, suggesting the existence of other risk factors. Testing of the other hypotheses verified that the implied volatility of the overall market as a systematic risk factor and the companies' size and financial leverage as nonsystematic risk factors are important in determining stock's expected returns and investors should consider these factors in their investment decisions. The findings of this research have important implications for social change. The outcome of this study can change the way individual and institutional investors as well as corporations make investment decisions and thus change the equilibrium prices in the stock market. These changes in turn could lead to significant changes in the resource allocation in the economy, in the economy's production capacity and production composition, and in the employment structure of the society.

Download or read book Multifactor Assets Pricing Model written by Khushboo Sagar and published by . This book was released on 2020 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Generous consideration has been pursued to the empirical testing of multi factor assets pricing models. However, literature provides mixed kind of evidences in the support of multi factor assets pricing model. This study reviews 20 research articles based on multi factor assets pricing model and examines 25 research papers based on the empirically testing of multi factor assets pricing model published during 2001 and 2018 to study the multi factor assets pricing model in the Indian context as well as foreign context. CAPM is a popular normative model used by researchers to explain the relationship between risk and expected return of a risky asset which was developed by Sharpe (1964) and Lintner (1965). This model takes only one risk factor which is the excess market portfolio return (Market premium). Because of poor performance of CAPM in explaining realized returns, the Fama and French three factor asset pricing model (1993) was developed. Fama and French (1993) documented the size effect and the value effect that were not included in the CAPM, generally known as CAPM anomalies. Mark M. Carhart (1997) developed the Carhart four factor model. It is an extension of the FF three factor model with one another factor i.e. momentum factor effect for asset pricing of stocks. In view of the limitations of the earlier three-factor model, Fama and French five-factor asset pricing model (2014) was developed. Fama and French (2014) came with profitability pattern and investment pattern in average stock return along with the market premium, size premium and value premium. This paper may be an expedient source of information to the academics, financial analyst and researchers to understand the asset pricing model.

Download or read book Asset Pricing written by Bing Cheng and published by World Scientific. This book was released on 2008 with total page 91 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modern asset pricing models play a central role in finance and economic theory and applications. This book introduces a structural theory to evaluate these asset pricing models and throws light on the existence of Equity Premium Puzzle. Based on the structural theory, some algebraic (valuation-preserving) operations are developed in asset spaces and pricing kernel spaces. This has a very important implication leading to practical guidance in portfolio management and asset allocation in the global financial industry. The book also covers topics, such as the role of over-confidence in asset pricing modeling, relationship of the portfolio insurance with option and consumption-based asset pricing models, etc.

Download or read book A New Model of Capital Asset Prices written by James W. Kolari and published by Springer Nature. This book was released on 2021-03-01 with total page 326 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book proposes a new capital asset pricing model dubbed the ZCAPM that outperforms other popular models in empirical tests using US stock returns. The ZCAPM is derived from Fischer Black’s well-known zero-beta CAPM, itself a more general form of the famous capital asset pricing model (CAPM) by 1990 Nobel Laureate William Sharpe and others. It is widely accepted that the CAPM has failed in its theoretical relation between market beta risk and average stock returns, as numerous studies have shown that it does not work in the real world with empirical stock return data. The upshot of the CAPM’s failure is that many new factors have been proposed by researchers. However, the number of factors proposed by authors has steadily increased into the hundreds over the past three decades. This new ZCAPM is a path-breaking asset pricing model that is shown to outperform popular models currently in practice in finance across different test assets and time periods. Since asset pricing is central to the field of finance, it can be broadly employed across many areas, including investment analysis, cost of equity analyses, valuation, corporate decision making, pension portfolio management, etc. The ZCAPM represents a revolution in finance that proves the CAPM as conceived by Sharpe and others is alive and well in a new form, and will certainly be of interest to academics, researchers, students, and professionals of finance, investing, and economics.

Download or read book Multi Factor Asset Pricing Models for German Stocks written by Wolfgang Bessler and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The large number of asset pricing models and empirical studies of stock returns are evidence of the desire to understand the return generating process of financial assets in general and for stocks in particular. One focus of the research in this area has been on multi-factor asset pricing models [Chen et al. (1986), Fama/French (1992)]. These models are based on the assumption that stock returns are generated by a limited number of economic variables such as company, industry or macroeconomic factors.The objective of this study is to analyze the importance of various economic factors in explaining the return structure for stocks in Germany and to investigate whether the impact of these factors is time varying. This is important, because in most studies of asset pricing models it is assumed that the parameters are non time varying. In particular, we investigate the time variability of the explanatory power and the beta coefficients in a multi-factor framework. For this we employ a rolling estimation procedure that allows us to analyze the time variability of the model coefficients.In the empirical analysis we use monthly data of four macroeconomic variables and the market index to explain the returns of four German industry indices for the period from 1974 to 2000. In contrast to most studies which exclude banks from their empirical analysis we use three industrial indices and a bank index. The economic factors included in our model are term spreads, interest rates, exchange rates and the ifo business index as well as the market index. The empirical results confirm that the factors used in our empirical analysis seem well suited to explain the stock returns especially for banks. Moreover, it is evident that the explanatory power and the beta coefficients are time varying.

Download or read book Multifactor Asset Pricing Analysis of International Value Investment Strategies written by John A. Doukas and published by . This book was released on 1998 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a large international equity market database that has not been previously used for such a purpose, this paper documents that value (i.e., high book-to-market ) stocks outperform growth (i.e., low book-to-market ) stocks, on average, in most countries during the January 1975 - December 1995 period, both absolutely and after adjusting for risk. The international evidence confirms the findings of previous work reported for the U.S.. For 1975-1995, the annual difference between the average returns on portfolios of high and low book-to-market stocks is 12.94% in North America, 10.42% in Europe, 17.26% in Pacific-Rim per year, and value stocks outperform growth stocks in 17 out of 18 national capital markets. Our analysis also shows that a three-factor model explains most of the cross-sectional variation in average returns on industry portfolios across countries and that the superior performance of the value investing strategy, documented in this study, is a manifestation of size and book-to-market effects. These results are consistent with those reported by Fama and French (1994, 1996) that show that the value-growth pattern in stock returns is largely explained by a three-factor asset pricing model. Our results suggest that the Fama and French (1996) three-factor asset pricing model is not limited to the U.S. stock market.

Download or read book Asset Pricing written by John H. Cochrane and published by Princeton University Press. This book was released on 2009-04-11 with total page 560 pages. Available in PDF, EPUB and Kindle. Book excerpt: Winner of the prestigious Paul A. Samuelson Award for scholarly writing on lifelong financial security, John Cochrane's Asset Pricing now appears in a revised edition that unifies and brings the science of asset pricing up to date for advanced students and professionals. Cochrane traces the pricing of all assets back to a single idea--price equals expected discounted payoff--that captures the macro-economic risks underlying each security's value. By using a single, stochastic discount factor rather than a separate set of tricks for each asset class, Cochrane builds a unified account of modern asset pricing. He presents applications to stocks, bonds, and options. Each model--consumption based, CAPM, multifactor, term structure, and option pricing--is derived as a different specification of the discounted factor. The discount factor framework also leads to a state-space geometry for mean-variance frontiers and asset pricing models. It puts payoffs in different states of nature on the axes rather than mean and variance of return, leading to a new and conveniently linear geometrical representation of asset pricing ideas. Cochrane approaches empirical work with the Generalized Method of Moments, which studies sample average prices and discounted payoffs to determine whether price does equal expected discounted payoff. He translates between the discount factor, GMM, and state-space language and the beta, mean-variance, and regression language common in empirical work and earlier theory. The book also includes a review of recent empirical work on return predictability, value and other puzzles in the cross section, and equity premium puzzles and their resolution. Written to be a summary for academics and professionals as well as a textbook, this book condenses and advances recent scholarship in financial economics.

Download or read book Integration Versus Segmentation of the Canadian and U S Stock Markets written by Susana Pérez Caldwell and published by . This book was released on 1997 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Pricing with a Reference Level of Consumption written by Joachim Grammig and published by . This book was released on 2008 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents an empirical evaluation of recently proposed asset pricing models which extend the standard preference specification by a reference level of consumption. We motivate an alternative model that accounts for the return on human capital as a determinant of the reference level. Our analysis is based on a broad cross-section of test assets which provides a level playing field for a comparison to established benchmark models. The human capital extended reference level model does a good job in explaining size and value premia. Estimated on Fama and French's size and book-to-market sorted portfolios it outperforms Lettau and Ludvigson's scaled CCAPM and delivers average pricing errors comparable to the Fama-French three-factor model.

Download or read book Do Consumption based Asset Pricing Models Explain Own history Predictability in Stock Market Returns written by Michael F. Ashby and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Integration Versus Segmentation of the Canadian and US Stock Markets a Multifactor Asset Pricing Model Approach written by and published by . This book was released on 1997 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Integration Versus Segmentation of the Canadian and US Stock Markets a Multifactor Asset Pricing Model Approach written by and published by . This book was released on 1997 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Evaluating Asset Pricing Models with Limited Commitment Using Household Consumption Data written by Dirk Krueger and published by . This book was released on 2007 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: We evaluate the asset pricing implications of a class of models in which risk sharing is imperfect because of limited enforcement of intertemporal contracts. Lustig (2004) has shown that in such a model the asset pricing kernel can be written as a simple function of the aggregate consumption growth rate and the growth rate of consumption of the set of households that do not face binding enforcement constraints. These unconstrained households have lower consumption growth rates than all other households in the economy. We use household data on consumption growth from the U.S. Consumer Expenditure Survey to identify unconstrained households, to estimate the pricing kernel implied by these models and evaluate their performance in pricing aggregate risk. We find that for high values of the relative risk aversion coefficient, the limited enforcement pricing kernel generates a market price of risk that is substantially closer to the data than the one obtained using the standard complete markets asset pricing kernel.