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Author: Mordecai Kurz
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Category :
Languages : en
Pages :
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Author: Mordecai Kurz
Publisher:
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Languages : en
Pages :
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Author: Andrea Buraschi
Publisher:
ISBN:
Category :
Languages : en
Pages : 71
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In this paper we study empirically the implications of macroeconomic disagreement for the time variation in bond market risk premia. If there is a source of heterogeneity in the belief structure of the economy then differences in beliefs can affect equilibrium asset prices, and the dynamics of disagreement may generate a source of predictable variation in excess bond returns. Using survey data on macroeconomic forecasts of fundamentals spanning interest rates, real aggregates and inflation variables at different horizons we propose a new empirically observable proxy to aggregate macroeconomic disagreement and find a number of novel results. Firstly, consistent with a general equilibrium model, heterogeneity affects the price of risk so that a single factor proxy for disagreement forecasts bond returns with R2 between 15%- 20%. Secondly, by allowing for a time-varying price of risk proportional to disagreement, we substantially improve the forecasting power of a standard affine model for expected returns. This result is carried over to Fama-Bliss regressions where we find that the information contained in the slope of the forward curve regarding expected returns versus expected changes in short rates is state-dependant. Thirdly, while the predictive content of the return forecasting factor (Cochrane and Piazzesi (2005)) is cut dramatically in the 2008 financial crisis, disagreement is largely unaffected. We interpret this result in terms of Fed interventions which may have distorted the shape of the forward curve, removing price based information on expected returns. Finally, we show that the information contained in agents' belief structure of the economy is different from that contained in macroeconomic aggregates, suggesting that a key determinant for bond returns is the joint subjective uncertainty surrounding the real economy, inflation, and monetary policy.
Author: Roman Frydman
Publisher: Princeton University Press
ISBN: 1400846455
Category : Business & Economics
Languages : en
Pages : 441
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This book originated from a 2010 conference marking the fortieth anniversary of the publication of the landmark "Phelps volume," Microeconomic Foundations of Employment and Inflation Theory, a book that is often credited with pioneering the currently dominant approach to macroeconomic analysis. However, in their provocative introductory essay, Roman Frydman and Edmund Phelps argue that the vast majority of macroeconomic and finance models developed over the last four decades derailed, rather than built on, the Phelps volume's "microfoundations" approach. Whereas the contributors to the 1970 volume recognized the fundamental importance of according market participants' expectations an autonomous role, contemporary models rely on the rational expectations hypothesis (REH), which rules out such a role by design. The financial crisis that began in 2007, preceded by a spectacular boom and bust in asset prices that REH models implied could never happen, has spurred a quest for fresh approaches to macroeconomic analysis. While the alternatives to REH presented in Rethinking Expectations differ from the approach taken in the original Phelps volume, they are notable for returning to its major theme: understanding aggregate outcomes requires according expectations an autonomous role. In the introductory essay, Frydman and Phelps interpret the various efforts to reconstruct the field--some of which promise to chart its direction for decades to come. The contributors include Philippe Aghion, Sheila Dow, George W. Evans, Roger E. A. Farmer, Roman Frydman, Michael D. Goldberg, Roger Guesnerie, Seppo Honkapohja, Katarina Juselius, Enisse Kharroubi, Blake LeBaron, Edmund S. Phelps, John B. Taylor, Michael Woodford, and Gylfi Zoega.
Author: Paul De Grauwe
Publisher: Princeton University Press
ISBN: 1400845378
Category : Business & Economics
Languages : en
Pages : 147
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In mainstream economics, and particularly in New Keynesian macroeconomics, the booms and busts that characterize capitalism arise because of large external shocks. The combination of these shocks and the slow adjustments of wages and prices by rational agents leads to cyclical movements. In this book, Paul De Grauwe argues for a different macroeconomics model--one that works with an internal explanation of the business cycle and factors in agents' limited cognitive abilities. By creating a behavioral model that is not dependent on the prevailing concept of rationality, De Grauwe is better able to explain the fluctuations of economic activity that are an endemic feature of market economies. This new approach illustrates a richer macroeconomic dynamic that provides for a better understanding of fluctuations in output and inflation. De Grauwe shows that the behavioral model is driven by self-fulfilling waves of optimism and pessimism, or animal spirits. Booms and busts in economic activity are therefore natural outcomes of a behavioral model. The author uses this to analyze central issues in monetary policies, such as output stabilization, before extending his investigation into asset markets and more sophisticated forecasting rules. He also examines how well the theoretical predictions of the behavioral model perform when confronted with empirical data. Develops a behavioral macroeconomic model that assumes agents have limited cognitive abilities Shows how booms and busts are characteristic of market economies Explores the larger role of the central bank in the behavioral model Examines the destabilizing aspects of asset markets
Author: Thorsten Hens
Publisher: Elsevier
ISBN: 0080921434
Category : Business & Economics
Languages : en
Pages : 607
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The models of portfolio selection and asset price dynamics in this volume seek to explain the market dynamics of asset prices. Presenting a range of analytical, empirical, and numerical techniques as well as several different modeling approaches, the authors depict the state of debate on the market selection hypothesis. By explicitly assuming the heterogeneity of investors, they present models that are descriptive and normative as well, making the volume useful for both finance theorists and financial practitioners. Explains the market dynamics of asset prices, offering insights about asset management approaches Assumes a heterogeneity of investors that yields descriptive and normative models of portfolio selections and asset pricing dynamics
Author: Matthew W. Sherwood
Publisher: Routledge
ISBN: 1351361929
Category : Business & Economics
Languages : en
Pages : 270
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This textbook provides the first holistic resource on Environmental, Social, and Governance (ESG) investing for undergraduate and graduate programs. It provides a thorough background and history of ESG investing, as well as cutting-edge industry developments, in a way that introduces the reader to the rapidly developing field of responsible investing. Beginning with a comprehensive background of ESG investing and the development of models measuring risk and return, the book then discusses the development of ESG risks, and provides an overview of ESG rating systems. The textbook also outlines the current position of ESG investing in portfolio management through granular analysis, provides insight into common investor concerns about ESG investments, discloses qualitative theories relevant to ESG investing, and reviews literature attempting to model ESG investment performance. Finally, the authors provide readers with a foundation on the development of financial models measuring risk and return, which will be useful for measuring the performance of ESG investments. With case studies from contributors around the world, this textbook is the first of its kind to truly provide a compelling blend of quantitative and qualitative analysis supporting the incorporation of ESG investment strategies into investment portfolios. Offering an excellent overview of the growing trends in ESG investing, as well as a close analysis of ESG theories and their practical application both today and in the future, this book will be a great resource for both undergraduates and graduate students.
Author:
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 610
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Author: John H. Cochrane
Publisher: Now Publishers Inc
ISBN: 1933019158
Category : Business & Economics
Languages : en
Pages : 117
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Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Author: Edgar Lawrence Smith
Publisher:
ISBN:
Category : Bonds
Languages : en
Pages : 152
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Author: Siew Ann Cheong
Publisher: Frontiers Media SA
ISBN: 2889765199
Category : Science
Languages : en
Pages : 341
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