Risultati della ricerca
Creator: Alvarez, Fernando, 1964-, Atkeson, Andrew, and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 371 Abstract:
Under mild assumptions, the data indicate that fluctuations in nominal interest rate differentials across currencies are primarily fluctuations in time-varying risk. This finding is an immediate implication of the fact that exchange rates are roughly random walks. If most fluctuations in interest differentials are thought to be driven by monetary policy, then the data call for a theory which explains how changes in monetary policy change risk. Here we propose such a theory based on a general equilibrium monetary model with an endogenous source of risk variation—a variable degree of asset market segmentation.
Parola chiave: Pricing Kernel, Segmented Markets, Asset Pricing-Puzzle, Time-Varying Conditional Variances, Fama Puzzle, and Forward Premium Anomaly Soggetto: F30 - International Finance: General, F31 - Foreign Exchange, E43 - Interest Rates: Determination, Term Structure, and Effects, G12 - Asset Pricing; Trading Volume; Bond Interest Rates, G15 - International Financial Markets, and F41 - Open Economy Macroeconomics
Creator: Hansen, Lars Peter and Jagannathan, Ravi Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 167 Abstract:
In this paper we develop alternative ways to compare asset pricing models when it is understood that their implied stochastic discount factors do not price all portfolios correctly. Unlike comparisons based on chi-squared statistics associated with null hypotheses that models are correct, our measures of model performance do not reward variability of discount factor proxies. One of our measures is designed to exploit fully the implications of arbitrage-free pricing of derivative claims. We demonstrate empirically the usefulness of methods in assessing some alternative stochastic factor models that have been proposed in asset pricing literature.
Soggetto: G10 - General Financial Markets: General (includes Measurement and Data), C13 - Estimation: General, C10 - Econometric and Statistical Methods and Methodology: General, C12 - Hypothesis Testing: General, G12 - Asset Pricing; Trading Volume; Bond Interest Rates, and E30 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
Creator: Koijen, Ralph S. J. and Yogo, Motohiro Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 510 Abstract:
We develop an asset pricing model with flexible heterogeneity in asset demand across investors, designed to match institutional and household holdings. A portfolio choice model implies characteristics-based demand when returns have a factor structure and expected returns and factor loadings depend on the assets' own characteristics. We propose an instrumental variables estimator for the characteristics-based demand system to address the endogeneity of demand and asset prices. Using U.S. stock market data, we illustrate how the model could be used to understand the role of institutions in asset market movements, volatility, and predictability.
Parola chiave: Institutional investors, Liquidity, Asset pricing model, Portfolio choice, and Demand system Soggetto: G23 - Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors and G12 - Asset Pricing; Trading Volume; Bond Interest Rates
Creator: Arellano, Cristina, Bai, Yan, Bocola, Luigi, and test Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 547 Abstract:
This paper measures the output costs of sovereign risk by combining a sovereign debt model with firm- and bank-level data. In our framework, an increase in sovereign risk lowers the price of government debt and has an adverse impact on banks’ balance sheets, disrupting their ability to finance firms. Importantly, firms are not equally affected by these developments: those that have greater financing needs and borrow from banks that are more exposed to government debt cut their production the most in a debt crisis. We measure the extent of this heterogeneity using Italian data and parameterize the model to match these cross-sectional facts. In counterfactual analysis, we find that heightened sovereign risk was responsible for one-third of the observed output decline during the 2011-2012 crisis in Italy.
Parola chiave: Sovereign debt crises, Firm heterogeneity, Financial intermediation, Business cycles, and Micro data Soggetto: E44 - Financial Markets and the Macroeconomy, F34 - International Lending and Debt Problems, G12 - Asset Pricing; Trading Volume; Bond Interest Rates, and G15 - International Financial Markets
Creator: Jagannathan, Ravi and Wang, Zhenyu Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 165 Abstract:
In empirical studies of the CAPM, it is commonly assumed that, (a) the return to the value-weighted portfolio of all stocks is a reasonable proxy for the return on the market portfolio of all assets in the economy, and (b) betas of assets remain constant over time. Under these assumptions, Fama and French (1992) find that the relation between average return and beta is flat. We argue that these two auxiliary assumptions are not reasonable. We demonstrate that when these assumptions are relaxed, the empirical support for the CAPM is very strong. When human capital is also included in measuring wealth, the CAPM is able to explain 28% of the cross sectional variation in average returns in the 100 portfolios studied by Fama and French. When, in addition, betas are allowed to vary over the business cycle, the CAPM is able to explain 57%. More important, relative size does not explain what is left unexplained after taking sampling errors into account.
Soggetto: G12 - Asset Pricing; Trading Volume; Bond Interest Rates
Creator: Boyd, John H. and Jagannathan, Ravi Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 173 Abstract:
This study examines common stock prices around ex-dividend dates. Such price data usually contain a mixture of observations—some with and some without arbitrageurs and/or dividend capturers active. Our theory predicts that such mixing will result in some nonlinear relation between percentage price drop and dividend yield—not the commonly assumed linear relation. This prediction and another important prediction of theory are supported empirically. In a variety of tests, marginal price drop is not significantly different from the dividend amount. Thus, over the last several decades, one-for-one marginal price drop has been an excellent (average) rule of thumb.
Soggetto: G14 - Information and Market Efficiency; Event Studies; Insider Trading and G12 - Asset Pricing; Trading Volume; Bond Interest Rates
Creator: Jagannathan, Ravi and Murray, Frank Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 229 Abstract:
It is well documented that on average, stock prices drop by less than the value of the dividend on ex-dividend days. This has commonly been attributed to the effect of tax clienteles. We use data from the Hong Kong stock market where neither dividends nor capital gains are taxed. As in the U.S.A. the average stock price drop is less than the value of the dividend; specifically, in Hong Kong the average dividend was HK $0.12 and the average price drop was HK $0.06. We are able to account for this both theoretically and empirically through market microstructure based arguments.
Parola chiave: Dividends, Asset pricing, Market microstructure, and Bid-ask spread Soggetto: G35 - Payout Policy and G12 - Asset Pricing; Trading Volume; Bond Interest Rates
Creator: Boldrin, Michele and Levine, David K. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 279 Abstract:
Market booms are often followed by dramatic falls. To explain this requires an asymmetry in the underlying shocks. A straightforward model of technological progress generates asymmetries that are also the source of growth cycles. Assuming a representative consumer, we show that the stock market generally rises, punctuated by occasional dramatic falls. With high risk aversion, bad news causes dramatic increases in prices. Bad news does not correspond to a contraction of existing production possibilities, but to a slowdown in their rate of expansion. This economy provides a model of endogenous growth cycles in which recoveries and recessions are dictated by the adoption of innovations.
Parola chiave: Technological Revolutions, Stock Market Value, and Growth Cycles Soggetto: O30 - Innovation; Research and Development; Technological Change; Intellectual Property Rights: General, G12 - Asset Pricing; Trading Volume; Bond Interest Rates, O41 - One, Two, and Multisector Growth Models, and O40 - Economic Growth and Aggregate Productivity: General
Creator: McGrattan, Ellen R. and Prescott, Edward C. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 313 Abstract:
Mehra and Prescott (1985) found the difference between average equity and debt returns puzzling because it was too large to be a premium for bearing nondiversifiable aggregate risk. Here, we re-examine this puzzle, taking into account some factors ignored by Mehra and Prescott—taxes, regulatory constraints, and diversification costs—and focusing on long-term rather than short-term savings instruments. Accounting for these factors, we find the difference between average equity and debt returns during peacetime in the last century is less than 1 percent, with the average real equity return somewhat under 5 percent, and the average real debt return almost 4 percent. As theory predicts, the real return on debt has been close to the 4 percent average after-tax real return on capital. Similarly, as theory predicts, the real return on equity is equal to the after-tax real return on capital plus a modest premium for bearing nondiversifiable aggregate risk.
Soggetto: G12 - Asset Pricing; Trading Volume; Bond Interest Rates
Creator: McGrattan, Ellen R. and Prescott, Edward C. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 294 Abstract:
Many stock market analysts think that in 1929, at the time of the crash, stocks were overvalued. Irving Fisher argued just before the crash that fundamentals were strong and the stock market was undervalued. In this paper, we use growth theory to estimate the fundamental value of corporate equity and compare it to actual stock valuations. Our estimate is based on values of productive corporate capital, both tangible and intangible, and tax rates on corporate income and distributions. The evidence strongly suggests that Fisher was right. Even at the 1929 peak, stocks were undervalued relative to the prediction of theory.
Soggetto: N22 - Economic History: Financial Markets and Institutions: U.S.; Canada: 1913-, G12 - Asset Pricing; Trading Volume; Bond Interest Rates, and E62 - Fiscal Policy