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Author: Ravi Jagannathan
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Abstract: We show that long run consumption risk models imply that the covariance matrix of the logarithm of price to dividend (P/D) ratios of stocks has a strict factor structure. Factor analysis of the P/D ratios of 25 portfolios formed by sorting stocks based on their size and book to market ratio during the 1943 to 2008 reveals two significant factors. Consistent with theory, these factors predict growth in US aggregate consumption & dividends and consumption growth volatility, and explain the cross section of average excess returns on portfolios based on size, book/market, long term reversal, short term reversal, and earnings to price ratios.
Author: Ravi Jagannathan
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Abstract: We show that long run consumption risk models imply that the covariance matrix of the logarithm of price to dividend (P/D) ratios of stocks has a strict factor structure. Factor analysis of the P/D ratios of 25 portfolios formed by sorting stocks based on their size and book to market ratio during the 1943 to 2008 reveals two significant factors. Consistent with theory, these factors predict growth in US aggregate consumption & dividends and consumption growth volatility, and explain the cross section of average excess returns on portfolios based on size, book/market, long term reversal, short term reversal, and earnings to price ratios.
Author: M. Ali Khan
Publisher: Springer Science & Business Media
ISBN: 3662070715
Category : Business & Economics
Languages : en
Pages : 441
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Book Description
Apart from the underlying theme that all the contributions to this volume pertain to models set in an infinite dimensional space, they differ on many counts. Some were written in the early seventies while others are reports of ongoing research done especially with this volume in mind. Some are surveys of material that can, at least at this point in time, be deemed to have attained a satisfactory solution of the problem, while oth ers represent initial forays into an original and novel formulation. Some furnish alternative proofs of known, and by now, classical results, while others can be seen as groping towards and exploring formulations that have not yet reached a definitive form. The subject matter also has a wide leeway, ranging from solution concepts for economies to those for games and also including representation of preferences and discussion of purely mathematical problems, all within the rubric of choice variables belonging to an infinite dimensional space, interpreted as a commodity space or as a strategy space. Thus, this is a collective enterprise in a fairly wide sense of the term and one with the diversity of which we have interfered as little as possible. Our motivation for bringing all of this work under one set of covers was severalfold.
Author: Ravi Bansal
Publisher:
ISBN:
Category :
Languages : en
Pages : 34
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Book Description
The recently developed long-run risks asset pricing model shows that concerns about long-run expected growth and time-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can account for the risk premia and asset price fluctuations. In addition, the model can empirically account for the cross-sectional differences in asset returns. Hence, the long-run risks model provides a coherent and systematic framework for analyzing financial markets.
Author: Ravi Jagannathan
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 0
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Book Description
We show that long run consumption risk models imply that the covariance matrix of the logarithm of price to dividend (P/D) ratios of stocks has a strict factor structure. Factor analysis of the P/D ratios of 25 portfolios formed by sorting stocks based on their size and book to market ratio during the 1943 to 2008 reveals two significant factors. Consistent with theory, these factors predict growth in US aggregate consumption & dividends and consumption growth volatility, and explain the cross section of average excess returns on portfolios based on size, book/market, long term reversal, short term reversal, and earnings to price ratios.
Author: Ravi Bansal
Publisher:
ISBN:
Category : Assets (Accounting)
Languages : en
Pages : 36
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Book Description
We provide an empirical evaluation of the forward-looking long-run risks (LRR) model and highlight model differences with the backward-looking habit based asset pricing model. We feature three key results: (i) Consistent with the LRR model, there is considerable evidence in the data of time-varying expected consumption growth and volatility, (ii) The LRR model matches the key asset markets data features, (iii) In the data and in the LRR model accordingly, past consumption growth does not predict future asset prices, whereas lagged consumption in the habit model forecasts future price-dividend ratios with an R2 of over 40%. Overall, our evidence implies that the LRR model provides a coherent framework to analyze and interpret asset prices.
Author: John H. Cochrane
Publisher: Now Publishers Inc
ISBN: 1933019158
Category : Business & Economics
Languages : en
Pages : 117
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Book Description
Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Author: Jason Beeler
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 50
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Book Description
The long-run risks model of asset prices explains stock price variation as a response to persistent fluctuations in the mean and volatility of aggregate consumption growth, by a representative agent with a high elasticity of intertemporal substitution. This paper documents several empirical difficulties for the model as calibrated by Bansal and Yaron (BY, 2004) and Bansal, Kiku, and Yaron (BKY, 2007a). BY's calibration counterfactually implies that long-run consumption and dividend growth should be highly persistent and predictable from stock prices. BKY's calibration does better in this respect by greatly increasing the persistence of volatility fluctuations and their impact on stock prices. This calibration fits the predictive power of stock prices for future consumption volatility, but implies much greater predictive power of stock prices for future stock return volatility than is found in the data. Neither calibration can explain why movements in real interest rates do not generate strong predictable movements in consumption growth. Finally, the long-run risks model implies extremely low yields and negative term premia on inflation-indexed bonds.
Author: Rajnish Mehra
Publisher: Elsevier
ISBN: 0080555853
Category : Business & Economics
Languages : en
Pages : 635
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Book Description
Edited by Rajnish Mehra, this volume focuses on the equity risk premium puzzle, a term coined by Mehra and Prescott in 1985 which encompasses a number of empirical regularities in the prices of capital assets that are at odds with the predictions of standard economic theory.
Author: Jason Beeler
Publisher:
ISBN:
Category : Stocks
Languages : en
Pages :
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Book Description
Author: Wayne Ferson
Publisher: MIT Press
ISBN: 0262039370
Category : Business & Economics
Languages : en
Pages : 497
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Book Description
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.
