Interest Rates and Risk Premia in the Stock Market and in the Foreign Exchange Market PDF Download
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Author: Alberto Giovannini
Publisher:
ISBN:
Category : Capital assets pricing model
Languages : en
Pages : 40
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Author: Alberto Giovannini
Publisher:
ISBN:
Category : Capital assets pricing model
Languages : en
Pages : 40
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Book Description
Author: Alberto Giovannini
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 56
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Book Description
Recent empirical work indicates that, in a variety of financial markets, both conditional expectations and conditional variances of returns are time- varying. The purpose of this paper is to determine whether these joint fluctuations of conditional first and second moments are consistent with the Sharpe-Lintner-Mossin capital-asset-pricing model. We test the mean-variance model under several different assumptions about the time-variation of conditional second moments of returns, using weekly data from July 1974 to December 1986, that include returns on a portfolio composed of dollar, Deutsche mark, Sterling, and Swiss franc assets, together with the US stock market. The model is estimated constraining risk premia to depend on the time-varying conditional covariance matrix of the residuals of the expected returns equations. The results indicate that estimated conditional variances cannot explain the observed time-variation of risk premia. Furthermore, the constraints imposed by the static CAPH are always rejected.
Author: Juan Ayuso
Publisher:
ISBN:
Category : Capital assets pricing model
Languages : en
Pages : 52
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Author: Bernard Dumas
Publisher:
ISBN:
Category : Capital assets pricing model
Languages : en
Pages : 64
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Book Description
We consider a world capital market in which the investor population is heterogenous. Investors of different countries differ in the prices of goods at which they consume the income from their investments. In such a setting, the international CAPM incorporates rewards for exchange rate risk, in addition to the traditional reward for market-covariance risk. The aim of the paper is to determine whether these additional risk premia empirically playa significant role in the pricing of securities. The test being conducted is a test of a conditional version of the CAPM. It builds on the recent empirical literature which points out that stock market returns may, to some extent, be predicted on the basis of a number of instrumental variables, such as interest rates and dividend yields. All previous tests of the international CAPM with exchange risk premia have been tests of the unconditional version and have been inconclusive.
Author: Shaun K. Roache
Publisher:
ISBN:
Category : Banks and banking, Central
Languages : en
Pages : 25
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Author: Martin Lettau
Publisher:
ISBN:
Category : Carry trades (Foreign exchange)
Languages : en
Pages : 54
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Book Description
The downside risk CAPM (DR-CAPM) can price the cross section of currency returns. The market-beta differential between high and low interest rate currencies is higher conditional on bad market returns, when the market price of risk is also high, than it is conditional on good market returns. Correctly accounting for this variation is crucial for the empirical performance of the model. The DR-CAPM can jointly explain the cross section of equity, commodity, sovereign bond and currency returns, thus offering a unified risk view of these asset classes. In contrast, popular models that have been developed for a specific asset class fail to jointly price other asset classes.
Author:
Publisher: Springer-Verlag
ISBN: 3663085287
Category : Business & Economics
Languages : de
Pages : 306
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Book Description
Implementing unconditional as well as conditional beta pricing models, the author identifies global economic factors that affect the performance of international investments.
Author: Pentti J. K. Kouri
Publisher:
ISBN:
Category : Bonds
Languages : en
Pages : 44
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Book Description
This paper analyzes the effects of real income and price level uncertainty on equilibrium interest rates. It is demonstrated that even if there are no outside nominal assets, the interest rate on nominal bonds contains a risk premium, or as the case may be, a risk discount. The sign, and the magnitude, of the deviation from the Fisher parity depends on the covariance between the purchasing power of money on the one hand and real income on the other. The second part of the paper extends the model into a model of two countries, two monies and two bonds denominated in these two monies. It is shown, in contrast with statements made in the literature, that the 'efficiency' of international financial markets does not imply equality of expected real interest rates on bonds denominated in different currencies, nor does it imply that the forward exchange rate should be an unbiased predictor of the future spot exchange rate. This is again true even when there are no outside nominal assets in the world economy.
Author: Lorenzo Giorgianni
Publisher:
ISBN:
Category : Fiscal policy
Languages : en
Pages : 46
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Book Description
Author: Chenyang Feng
Publisher:
ISBN:
Category : Stocks
Languages : en
Pages : 20
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