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Author: Kenneth J. Singleton
Publisher: Princeton University Press
ISBN: 1400829232
Category : Business & Economics
Languages : en
Pages : 497
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Book Description
Written by one of the leading experts in the field, this book focuses on the interplay between model specification, data collection, and econometric testing of dynamic asset pricing models. The first several chapters provide an in-depth treatment of the econometric methods used in analyzing financial time-series models. The remainder explores the goodness-of-fit of preference-based and no-arbitrage models of equity returns and the term structure of interest rates; equity and fixed-income derivatives prices; and the prices of defaultable securities. Singleton addresses the restrictions on the joint distributions of asset returns and other economic variables implied by dynamic asset pricing models, as well as the interplay between model formulation and the choice of econometric estimation strategy. For each pricing problem, he provides a comprehensive overview of the empirical evidence on goodness-of-fit, with tables and graphs that facilitate critical assessment of the current state of the relevant literatures. As an added feature, Singleton includes throughout the book interesting tidbits of new research. These range from empirical results (not reported elsewhere, or updated from Singleton's previous papers) to new observations about model specification and new econometric methods for testing models. Clear and comprehensive, the book will appeal to researchers at financial institutions as well as advanced students of economics and finance, mathematics, and science.
Author: Kenneth J. Singleton
Publisher: Princeton University Press
ISBN: 1400829232
Category : Business & Economics
Languages : en
Pages : 497
Get Book Here
Book Description
Written by one of the leading experts in the field, this book focuses on the interplay between model specification, data collection, and econometric testing of dynamic asset pricing models. The first several chapters provide an in-depth treatment of the econometric methods used in analyzing financial time-series models. The remainder explores the goodness-of-fit of preference-based and no-arbitrage models of equity returns and the term structure of interest rates; equity and fixed-income derivatives prices; and the prices of defaultable securities. Singleton addresses the restrictions on the joint distributions of asset returns and other economic variables implied by dynamic asset pricing models, as well as the interplay between model formulation and the choice of econometric estimation strategy. For each pricing problem, he provides a comprehensive overview of the empirical evidence on goodness-of-fit, with tables and graphs that facilitate critical assessment of the current state of the relevant literatures. As an added feature, Singleton includes throughout the book interesting tidbits of new research. These range from empirical results (not reported elsewhere, or updated from Singleton's previous papers) to new observations about model specification and new econometric methods for testing models. Clear and comprehensive, the book will appeal to researchers at financial institutions as well as advanced students of economics and finance, mathematics, and science.
Author: Harald Tolleshaug
Publisher:
ISBN:
Category :
Languages : en
Pages : 109
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Book Description
Forecasting the expected returns on bonds with increasing certainty is wanted from all rational investors in the fixed income markets. The potential for higher returns increase with the ability to forecast expected returns, through better trading payoffs and improved hedging and risk management. The expectations hypothesis was long prevailing in the academical litterature. It stated that the rational investor was expected to require zero or at least a constant excess return on bonds with long maturity over short maturity. This is equal to no time varying risk premiums. It is however reasonable for the rational investor to have time varying risk preferences based on the economic situation and outlook for the future, as described by Cochrane (1999). Thus, bonds with different maturity may be priced with different risk in an efficient market, and accordingly have time varying risk premiums. The expectations hypothesis has thus been rejected. This has been manifested through the classical studies of Fama and Bliss (1987) as well as Campbell and Shiller (1991). These studies modelled predictions of bond returns on specific maturities, with a R2 up to 18%. In a new and original approach, Cochrane and Piazzesi (2005) models a single-factor that predicts bond returns of any maturity, with a R2 up to 44%, more than doubled from the studies mentioned above. This is done on the same dataset as Fama and Bliss (1987) used and would be a big discovery within the field, if the model can be accepted across time and datasets. I test the model of Cochrane and Piazzesi (2005) based on the framework that these used originally, as well as new tests they have provided as response to critique of the model. So far, no other paper has rejected this model on all these dimensions. I use very well accepted data, and reject the model in every dimension tested. This paper is thus the rejection of the Cochrane and Piazzesi (2005) single-factor bond forecasting model.
Author: John Howland Cochrane
Publisher:
ISBN:
Category : Bonds
Languages : en
Pages : 44
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Book Description
This paper studies time variation in expected excess bond returns. We run regressions of annual excess returns on forward rates. We find that a single factor predicts 1-year excess returns on 1-5 year maturity bonds with an R2 up to 43%. The single factor is a tent-shaped linear function of forward rates. The return forecasting factor has a clear business cycle correlation: Expected returns are high in bad times, and low in good times, and the return-forecasting factor forecasts long-run output growth. The return-forecasting factor also forecasts stock returns, suggesting a common time-varying premium for real interest rate risk. The return forecasting factor is poorly related to level, slope, and curvature movements in bond yields. Therefore, it represents a source of yield curve movement not captured by most term structure models. Though the return-forecasting factor accounts for more than 99% of the time-variation in expected excess bond returns, we find additional, very small factors that forecast equally small differences between long term bond returns, and hence statistically reject a one-factor model for expected returns
Author: Jonathan H. Wright
Publisher:
ISBN:
Category : Bonds
Languages : en
Pages : 64
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Book Description
Author: Graham Elliott
Publisher: Princeton University Press
ISBN: 0691140138
Category : Business & Economics
Languages : en
Pages : 566
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Book Description
A comprehensive and integrated approach to economic forecasting problems Economic forecasting involves choosing simple yet robust models to best approximate highly complex and evolving data-generating processes. This poses unique challenges for researchers in a host of practical forecasting situations, from forecasting budget deficits and assessing financial risk to predicting inflation and stock market returns. Economic Forecasting presents a comprehensive, unified approach to assessing the costs and benefits of different methods currently available to forecasters. This text approaches forecasting problems from the perspective of decision theory and estimation, and demonstrates the profound implications of this approach for how we understand variable selection, estimation, and combination methods for forecasting models, and how we evaluate the resulting forecasts. Both Bayesian and non-Bayesian methods are covered in depth, as are a range of cutting-edge techniques for producing point, interval, and density forecasts. The book features detailed presentations and empirical examples of a range of forecasting methods and shows how to generate forecasts in the presence of large-dimensional sets of predictor variables. The authors pay special attention to how estimation error, model uncertainty, and model instability affect forecasting performance. Presents a comprehensive and integrated approach to assessing the strengths and weaknesses of different forecasting methods Approaches forecasting from a decision theoretic and estimation perspective Covers Bayesian modeling, including methods for generating density forecasts Discusses model selection methods as well as forecast combinations Covers a large range of nonlinear prediction models, including regime switching models, threshold autoregressions, and models with time-varying volatility Features numerous empirical examples Examines the latest advances in forecast evaluation Essential for practitioners and students alike
Author: Christian Speck
Publisher:
ISBN:
Category :
Languages : en
Pages : 63
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Book Description
This paper investigates the holding period risk premia of U.S. corporate and Treasury bonds. Using excess return regressions, two priced risk factors are derived from yield and macroeconomic data: a priced term risk factor and a priced credit risk factor explain half of the variation in one-year corporate and Treasury excess returns. The information of the term risk factor is not represented by major yield characteristics but is a hidden risk factor whereas the credit risk factor is not hidden. The term risk premium is earned primarily for exposure to inflation and the yield level and the credit risk premium is earned for an exposure to real growth and the credit spread level. The regression results are usefull for the specification of the market prices of risk in affine credit term structure models: The two-factor representation of the risk premium suggests a rank restriction on the market prices of risk and an additional pricing factor to capture the hidden property of term risk.
Author: John H. Cochrane
Publisher: Princeton University Press
ISBN: 0691243247
Category : Business & Economics
Languages : en
Pages : 585
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Book Description
A comprehensive account of how government deficits and debt drive inflation Where do inflation and deflation ultimately come from? The fiscal theory of the price level offers a simple answer: Prices adjust so that the real value of government debt equals the present value of taxes less spending. Inflation breaks out when people don’t expect the government to fully repay its debts. The fiscal theory is well suited to today’s economy: Financial innovation undermines money demand, and central banks don’t control the money supply or aggressively change interest rates, invalidating classic theories, while large debts and deficits threaten inflation and constrain monetary policy. This book presents a comprehensive account of this important theory from one of its leading developers and advocates. John Cochrane aims to make fiscal theory useful as a conceptual framework and modeling tool, and for analyzing history and policy. He merges fiscal theory with standard models in which central banks set interest rates, giving a novel account of monetary policy. He generalizes the theory to explain data and make realistic predictions. For example, inflation decreases in recessions despite deficits because discount rates fall, raising the value of debt; specifying that governments promise to partially repay debt avoids classic puzzles and allows the theory to apply at all times, not just during periods of high inflation. Cochrane offers an extensive rethinking of monetary doctrines and institutions through the eyes of fiscal theory, and analyzes the era of zero interest rates and post-pandemic inflation. Filled with research by Cochrane and others, The Fiscal Theory of the Price Level offers important new insights about fiscal and monetary policy.
Author: Sibel Korkmaz
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Jonas Eriksen
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Riccardo Rebonato
Publisher:
ISBN: 1107165857
Category : Business & Economics
Languages : en
Pages : 781
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Book Description
Rebonato provides an authoritative, clear, and up-to-date explanation of the cutting-edge innovations in affine modeling for government bonds, and provides readers with the precise tools to develop their own models. This book combines precise theory with up-to-date empirical evidence to build, with the minimum mathematical sophistication required for the task, a critical understanding of what drives the government bond market.
