Download or read book Time Varying Betas Help in Asset Pricing written by Aslihan Altay Salih and published by . This book was released on 2006 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although there is a consensus about time variation in market betas, it is not clear how this variation should be captured. Several researchers continue to analyze different versions of the conditional CAPM. However, Ghysels (1998) shows that these conditional CAPM models fail to capture the dynamics of beta risk. In this study, we introduce a new model, threshold CAPM, which outperforms both the conditional and unconditional CAPMs by generating smaller pricing errors. We also show that the beta risk changes through time with the changes in the economic environment and the dynamics of time variation of beta differ across industries. These findings have important implications for asset allocation, portfolio selection, and hedging decisions.
Download or read book Asset Pricing with Time Varying Volatility written by Victor Ng and published by . This book was released on 1989 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book On Stable Factor Structures in the Pricing of Risk written by Eric Ghysels and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: There is now considerable evidence suggesting that estimated betas of unconditional CAPM models exhibit statistically significant time variation. Therefore, many have advocated the use of conditional CAPM models. If we succeed in capturing the dynamics of beta risk, we are sure to outperform constant beta models. However, if the beta risk is inherently misspecified there is a real possibility that we commit serious pricing errors, potentially larger than with a constant traditional beta model. In this paper we show that this is indeed the case, namely that pricing errors with constant traditional beta models are smaller than with conditional CAPM models.
Download or read book Recent Econometric Techniques for Macroeconomic and Financial Data written by Gilles Dufrénot and published by Springer Nature. This book was released on 2020-11-21 with total page 387 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book provides a comprehensive overview of the latest econometric methods for studying the dynamics of macroeconomic and financial time series. It examines alternative methodological approaches and concepts, including quantile spectra and co-spectra, and explores topics such as non-linear and non-stationary behavior, stochastic volatility models, and the econometrics of commodity markets and globalization. Furthermore, it demonstrates the application of recent techniques in various fields: in the frequency domain, in the analysis of persistent dynamics, in the estimation of state space models and new classes of volatility models. The book is divided into two parts: The first part applies econometrics to the field of macroeconomics, discussing trend/cycle decomposition, growth analysis, monetary policy and international trade. The second part applies econometrics to a wide range of topics in financial economics, including price dynamics in equity, commodity and foreign exchange markets and portfolio analysis. The book is essential reading for scholars, students, and practitioners in government and financial institutions interested in applying recent econometric time series methods to financial and economic data.
Download or read book Cointegration Causality and Forecasting written by Halbert White and published by Oxford University Press, USA. This book was released on 1999 with total page 512 pages. Available in PDF, EPUB and Kindle. Book excerpt: A collection of essays in honour of Clive Granger. The chapters are by some of the world's leading econometricians, all of whom have collaborated with and/or studied with both) Clive Granger. Central themes of Granger's work are reflected in the book with attention to tests for unit roots and cointegration, tests of misspecification, forecasting models and forecast evaluation, non-linear and non-parametric econometric techniques, and overall, a careful blend of practical empirical work and strong theory. The book shows the scope of Granger's research and the range of the profession that has been influenced by his work.
Download or read book Empirical Asset Pricing written by Wayne Ferson and published by MIT Press. This book was released on 2019-03-12 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.
Download or read book Asset Pricing Models with Conditional Betas and Alphas written by Wayne E. Ferson and published by . This book was released on 2010 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the estimation of asset pricing model regressions with conditional alphas and betas, focusing on the joint effects of data snooping and spurious regression. We find that the regressions are reasonably well specified for conditional betas, even in settings where simple predictive regressions are severely biased. However, there are biases in estimates of the conditional alphas. When time-varying alphas are suppressed and only time-varying betas are considered, the betas become baised. Previous studies overstate the significance of time-varying alphas.
Download or read book Conditional Asset Pricing Predicting Time Varying Beta Factors with Group Method of Data Handling Methods written by Sebastian Schneider and published by . This book was released on 2005 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Allowing for time-varying risk premia yields sophisticated asset pricing models, but the search for adequate model specifications is more challenging. We introduce, to our knowledge, previously in conditional asset pricing not used Group Method of Data Handling (GMDH) that rests on sorting out requiring statsitical models for complex problems of unknown structure but does not require a model to predict conditional variation in betas. We find that lagged instruments used to proxy for expected returns in conditional asset pricing provide a challenge not only for the unconditional CAPM but also the Fama-French-model. Thereby non-linear GMDH-algorithms challenge traditional models of conditional asset pricing as we find a highly non-linear influence of lagged instruments on both conditional alphas and betas. Therefore, predetermining a structure for functional relationships between conditional alphas as well as betas and lagged instruments may lead to a significant misspecification of asset pricing models.
Download or read book Asset Pricing Theory written by Costis Skiadas and published by Princeton University Press. This book was released on 2009-02-09 with total page 363 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asset Pricing Theory is an advanced textbook for doctoral students and researchers that offers a modern introduction to the theoretical and methodological foundations of competitive asset pricing. Costis Skiadas develops in depth the fundamentals of arbitrage pricing, mean-variance analysis, equilibrium pricing, and optimal consumption/portfolio choice in discrete settings, but with emphasis on geometric and martingale methods that facilitate an effortless transition to the more advanced continuous-time theory. Among the book's many innovations are its use of recursive utility as the benchmark representation of dynamic preferences, and an associated theory of equilibrium pricing and optimal portfolio choice that goes beyond the existing literature. Asset Pricing Theory is complete with extensive exercises at the end of every chapter and comprehensive mathematical appendixes, making this book a self-contained resource for graduate students and academic researchers, as well as mathematically sophisticated practitioners seeking a deeper understanding of concepts and methods on which practical models are built. Covers in depth the modern theoretical foundations of competitive asset pricing and consumption/portfolio choice Uses recursive utility as the benchmark preference representation in dynamic settings Sets the foundations for advanced modeling using geometric arguments and martingale methodology Features self-contained mathematical appendixes Includes extensive end-of-chapter exercises
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 Asset Pricing Using Block Cholesky GARCH and Time varying Betas written by Stefano Grassi and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Dynamic Programming and Optimal Control written by Dimitri P. Bertsekas and published by . This book was released on 2005 with total page 543 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The leading and most up-to-date textbook on the far-ranging algorithmic methododogy of Dynamic Programming, which can be used for optimal control, Markovian decision problems, planning and sequential decision making under uncertainty, and discrete/combinatorial optimization. The treatment focuses on basic unifying themes, and conceptual foundations. It illustrates the versatility, power, and generality of the method with many examples and applications from engineering, operations research, and other fields. It also addresses extensively the practical application of the methodology, possibly through the use of approximations, and provides an extensive treatment of the far-reaching methodology of Neuro-Dynamic Programming/Reinforcement Learning. The first volume is oriented towards modeling, conceptualization, and finite-horizon problems, but also includes a substantive introduction to infinite horizon problems that is suitable for classroom use. The second volume is oriented towards mathematical analysis and computation, treats infinite horizon problems extensively, and provides an up-to-date account of approximate large-scale dynamic programming and reinforcement learning. The text contains many illustrations, worked-out examples, and exercises."--Publisher's website.
Download or read book Learning about Beta Time varying Factor Loadings Expected Returns and the Conditional CAPM written by Tobias Adrian and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Tests of Asset Pricing with Time varying Expected Risk Premiums and Market Betas written by Wayne Ferson and published by . This book was released on 1987 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Financial Markets and the Real Economy written by John H. Cochrane and published by Now Publishers Inc. This book was released on 2005 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Download or read book Empirical Evidence on Asset Pricing and Time varying Beta written by and published by . This book was released on 2022 with total page 329 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Asset Pricing Anomalies and Time Varying Betas written by Devraj Basu and published by . This book was released on 2019 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we develop a new measure of specification error, and thus derive new statistical tests, for conditional factor models, i.e. models in which the factor loadings (and hence risk premia) are allowed to be time-varying. Our test exploits the close links between the stochastic discount factor framework and mean-variance efficiency. We show that a given set of factors is a true conditional asset pricing model if and only if the efficient frontiers spanned by the traded assets and the factor-mimicking portfolios, respectively, intersect. In fact, we show that our test is proportional to the difference in squared Sharpe ratios of these two frontiers.We draw three main conclusions from our empirical findings. First, optimal scaling clearly improves the performance of asset pricing models, to the point where several of the scaled models are capable of explaining asset pricing anomalies. However, even the optimally scaled models fall short of being true conditional asset pricing models in that they fail to price actively managed portfolios correctly. Second, there is significant time-variation in factor loadings and hence risk premia, which plays a significant role in asset pricing. Moreover, the optimal factor loadings display a high degree of non-linearity in the conditioning variables, suggesting that the linear scaling prevalent in the literature is sub-optimal and does not capture the inter-temporal pattern of risk premia. Third, skewness and kurtosis do matter in the conditional setting, while adding little to unconditional performance.
