Author: Marcelo MelloPublisher:
ISBN:
Category :
Languages : en
Pages : 238
Book Description
Essays in Economic Growth and Asset Pricing
Author: Marcelo MelloEssays on Asset Pricing
Author: Bosung JangPublisher:
ISBN:
Category : Assets (Accounting)
Languages : en
Pages : 140
Book Description
This dissertation studies how asset prices are related to various macroeconomic and financial factors. In the first chapter, I examine the influence of external financing costs on growth and asset prices. Using U.S. high-tech firm data and the aggregate financing cost measure of Eisfeldt and Muir (2016), I find that an increase in financing cost can have negative effects on R&D by reducing equity finance. This result suggests that financing cost can have substantial impacts on long-run productivity through the R&D channel. Motivated by this idea, I construct a general equilibrium model where financing costs affect innovation activities and future productivity. My model endogenously generates long-run risk and matches key features of macroeconomic and asset price data. The model produces a sizable equity premium, doing a good job of matching macro moments in the data. Furthermore, a large risk premium of R&D-intensive stocks is justified in the model as in the data. In addition, as a higher financing cost forecasts lower productivity growth in the model, this prediction is supported by empirical evidence. In the second chapter, I investigate whether heterogeneity between domestic and foreign households can help explain the cross-section of stock returns. For this analysis, I apply Yogo’s (2006) durable consumption model to a two-country setting using Korean stock market data. In Korea, U.S. investors have been a dominant foreign investor group, given that the total share of foreigners is considerably large. By incorporating the stochastic discount factor of the U.S. into the model, I find that it plays a significant role in pricing assets. In particular, our model is successful in accounting for the expected excess return of relatively high book-to-market equity groups, producing lower pricing errors than the Fama-French 3 factor model. In the third chapter, I study the effects of debt maturity choice on stock returns and financial structure. I construct a model where firms can issue both short-term and long-term bonds, subject to collateral constraints. I also assume that, when they run financial deficits, firms use equity finance paying issuance costs. The model performs well in matching empirical facts about stock returns and the financial structure of firms. In addition, the model provides an interesting implication that firms substitute between leverage and maturity. In the literature, theoretical explanations for the substitution relationship have been mainly based on conflicts between stakeholders. Without hinging on the contract-theoretic approach, my model replicates the theoretical prediction.
Economic Uncertainty, Instabilities And Asset Bubbles: Selected Essays
Author: Anastasios G MalliarisPublisher: World Scientific
ISBN: 9814480045
Category : Business & Economics
Languages : en
Pages : 373
Book Description
The compendium of papers in this volume focuses on aspects of economic uncertainty, financial instabilities and asset bubbles.Economic uncertainty is modeled in continuous time using the mathematical techniques of stochastic calculus. A detailed treatment of important topics is provided, including the existence and uniqueness of asymptotic economic growth, the modeling of inflation and interest rates, the decomposition of inflation and its volatility, and the extension of the quantity theory of money to allow for randomness.The reader is also introduced to the methods of chaotic dynamics, and this methodology is applied to asset pricing, the European equity markets, and the multi-fractality in foreign currency markets.Since the techniques of stochastic calculus and chaotic dynamics do not readily accommodate the presence of stochastic bubbles, several papers discuss in depth the presence of financial bubbles in asset prices, and econometric work is performed to link such bubbles to monetary policy.Finally, since bubbles often burst rather than deflate slowly, the last section of the book studies the crash of October 1987 as well as other crashes of national equity markets due to the Persian gulf crisis.
Three Essays in Asset Pricing
Author: Alan PicardPublisher:
ISBN:
Category :
Languages : en
Pages : 165
Book Description
Abstract This dissertation consists of three essays. My first paper re-examines the link between idiosyncratic risk and expected returns for a large sample of firms in both developed and emerging markets. Recent studies using Fama-French three factor models have shown a negative relationship between idiosyncratic volatility and expected returns for developed markets. This relationship has not been studied to date for emerging markets. This study relates the current-month’s idiosyncratic volatility to the subsequent month’s returns for a sample of both developed and emerging markets expanding benchmark factors by including both a momentum and a systematic liquidity risk component. My second essay contributes to the important literature on the topic of the small capitalization stocks historical outperformance over large capitalization stocks by investigating the hypothesis that the small firm premium is related to macroeconomic and financial variables and that relationship is driven by the economic cycle in the United States and Canada. More specifically, this study employs recent advances in nonlinear time series models to explore the relationship between the small firm premium, and financial and macroeconomic variables in the Canadian and U.S. economies. My third paper re-examines the findings of a recent research paper that suggested that market wide liquidity may act as a leading indicator to the economic cycle. Using several liquidity measures and various macroeconomic variables to proxy for the economic conditions, the paper presents evidence that stock market liquidity could forecast business cycles: A major decrease in the overall level of market liquidity could indicate weak economic growth in the subsequent months. However, the drawback in the analysis is that the relationship is investigated in a linear approach even though it has been proven that most macroeconomic variables follow non-linear dynamics. Employing similar liquidity measures and macroeconomic proxies, and two popular econometrics models that account for non-linear behavior, this study hence re-investigates the relationship between stock market liquidity and business cycles.
Selected Essays in Empirical Asset Pricing
Author: Christian FunkePublisher: Springer Science & Business Media
ISBN: 3834998141
Category : Business & Economics
Languages : en
Pages : 123
Book Description
Christian Funke aims at developing a better understanding of a central asset pricing issue: the stock price discovery process in capital markets. Using U.S. capital market data, he investigates the importance of mergers and acquisitions (M&A) for stock prices and examines economic links between customer and supplier firms. The empirical investigations document return predictability and show that capital markets are not perfectly efficient.
Essays in Asset Pricing and Applied Micro-economics
Author: Mark William ClementsPublisher:
ISBN:
Category :
Languages : en
Pages : 532
Book Description
In the first chapter, Christian Goulding and I present a model of asset prices with recursive preferences and the simple consumption growth dynamics of Mehra and Prescott (1985) but relax the assumption that preference parameters are constant over time. We show that rare, temporary, and plausible fluctuations in the elasticity of inter-temporal substitution (EIS) and risk aversion (RA) can quantitatively explain numerous regularities in U.S. asset prices including: the equity premium and risk-free rate puzzles, excess return and consumption growth predictability, a counter-cyclical risk premium and an upward-sloping real yield curve. A novel implication is that time-varying EIS is more important than time-varying RA for explaining many of these regularities, suggesting a new source of risk in investors' ability to plan their consumption over long horizons. In addition, our model can accommodate a behavioral interpretation of psychological factors (e.g. fear) that drive fluctuations in asset prices beyond traditional risk factors.
Author: Vassilios Dimitrakas
Author: Serena Frazzoni
Author: Jie Bai
Author: John Hatgioannides