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1
Pettersson, Pernilla. "Equity Premium Puzzle : teori och empiri." Thesis, Uppsala University, Department of Economics, 2006. http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-6401.
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Syftet med uppsatsen är att diskutera det så kallade equity premium puzzle. Jag
analyserar teoretiskt den intertemporala konsumtionsbaserade CAPM (C-CAPM),
sammanställer en del av litteraturdiskussionen som finns på området samt empiriskt
testar C-CAPM på svensk data. Fenomenet equity premium puzzle innebär att
överavkastningen på aktier är så stor att det inte stämmer med den ekonomiska teorin.
Enligt teorin beror C-CAPMs riskpremie på kovariansen mellan konsumtionen och
aktieavkastningen. Litteraturen visar att forskare inte har lyckats förklara equity
premium puzzle genom att ändra antagandena i grundmodellen. Den empiriska
undersökningen visar att equity premium puzzle även uppkommer på svensk data.
2
Bart-Williams, Claudius Pythias. "On asset pricing and the equity premium puzzle." Thesis, Brunel University, 2000. http://bura.brunel.ac.uk/handle/2438/6371.
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Presented here are consumption and production related asset pricing models which seek to explain stock market behaviour through the stock premium over risk-free bonds and to do so using parameter values consistent with theory. Our results show that there are models capable of explaining stock market behaviour. For the consumption-based model, we avoid many of the suggestions to artificially boost the predicted stock premium such as modelling consumption as leverage claims; instead we use the notion of surplus consumption. We find that with surplus consumption, there are models including the much-maligned power utility model, capable of yielding theory consistent estimates for the discount rate, risk-free rate as well as the coefficient of relative risk aversion, y. Since real business cycle theory assumes a risk aversion coefficient of 1, we conclude that our model which gives a value close to but not equal to 1, provides an indication of the impact of market imperfections. For production, we present many of the existing models which seek to explain stock market behaviour using production data which we find to be generally incapable of explaining stock market behaviour. We conclude by presenting a profit based formulation which uses deviations of actual from expected profits and dividends via stock price reaction parameters to successfully explain stock market behaviour. We also conclude that the use of a profit based formulation allows for a link to investment, output and pricing decisions and hence link consumption and production.
3
Hartmann, Nora. "Dividendenpolitik und das Equity-Premium-Puzzle bei beschränkter Kapitalgeberrationalität." [S.l. : s.n.], 2004. http://deposit.ddb.de/cgi-bin/dokserv?idn=97119565X.
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Li, Yiran. "Is Rationality Bounded？ An Interpretation on Equity Premium Puzzle." Thesis, Linnéuniversitetet, Ekonomihögskolan, ELNU, 2011. http://urn.kb.se/resolve?urn=urn:nbn:se:lnu:diva-12215.
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Since equity premium puzzle had long been a problem, many economists tried to give reasonable interpretations to the puzzle. I focus on the type of theories using bounded rationality as the answer to the problem. I am willing to find out that whether the puzzle still exists in recent decades. If it does exist, are the theories of bounded rationality still able to explain the puzzle? In the beginning, I introduce two theories referring to bounded rationality. Afterwards, I empirically analyze the data of the U.S., Japan and Euro-area by using a simpler model based on rationality. Interestingly, circumstances vary a lot from country to country. One theory may be suitable for one country but not for the others. Even so, the “suitable” theory fails to completely explain the whole tendency of variation during the observed period in the country. In the future, we still need to explore in depth of the puzzle.
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Chen, Andrew Y. "Essays on Asset Pricing in Production Economies." The Ohio State University, 2014. http://rave.ohiolink.edu/etdc/view?acc_num=osu1398770166.
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Huang, (Alan) Guoming. "Essays on the equity premium puzzle, earnings volatility, and expected stock returns." Diss., Connect to online resource, 2005. http://wwwlib.umi.com/dissertations/fullcit/3186936.
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Kira, Guilherme. "The equity premium puzzle: um estudo de viés de seleção dos ativos." reponame:Repositório Institucional do FGV, 2016. http://hdl.handle.net/10438/16457.
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As empresas de capital aberto, listadas em bolsa de valores, são naturalmente aquelas que vieram apresentando retornos superiores perante às demais empresas do seu setor. Assim, será que o viés de seleção desses ativos in uencia sigini cativamente no resultado do Equity Premium Puzzle, primordialmente lançado por Mehra and Prescott (1985)? É essa pergunta que este trabalho investiga e conclui que, sim, de fato pode haver uma in uência desse viés em explicar o Puzzle . Para isso, iremos gerar uma economia cujos ativos, por hipótese, sejam preci cados de acordo com o fator estocástico de desconto (SDF) baseado em consumo, ou seja, os modelos conhecidos como CCAPM (Consumption Capital Asset Pricing Model). Assim, essa economia será gerada via simulação de Monte Carlo, de forma que iremos construir um índice benchmark dessa economia, nos quais participariam apenas os ativos que foram historicamente mais rentáveis. Adota-se tal metodologia em paralelo à forma como os reais benchmarks são construidos (S&P 500, Nasdaq, Ibovespa), em que neles participam, basicamente, as empresas de capital aberta mais negociadas em Bolsa de Valores, que são, comumente, as empresas historicamente mais rentáveis da economia. Em sequência, iremos realizar a estimação via GMM (Generalized Method of Moments) de um dos parâmetros de interesse de uma economia CCAPM: o coe ciente de aversão relativa ao risco (CRRA). Finalmente, os resultados obtidos são comparados e analisados quanto ao viés de estimação.
8
Praudins, Atis. "The Dynamics of Equity Risk Premium : The case of France, Germany, Sweden, United Kingdom and USA." Thesis, Internationella Handelshögskolan, Högskolan i Jönköping, IHH, Economics, Finance and Statistics, 2012. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-18270.
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Equity risk premium is a financial variable that is surrounded by mystery. Starting from the almost 30 year old equity premium puzzle caused by considerations that equity premium values which are observable in past data imply an implausibly high risk aversion to more recent statements that equity premium does not exist anymore. The purpose of this paper is to find out more about the traits and characteristics of equity risk premium, its current status and interactions of its values across international markets by conducting data analysis on mature equity markets using optimal methods as suggested in academic literature. This paper attempts to clear some of the confusion regarding equity premiums by analyzing equity excess returns in the mature equity markets of France, Germany, Sweden, United Kingdom and USA from 1970 to 2012. It is concluded that equity premium follows a mean reverting process however in short-term and mid-term its values can be volatile and in March 2000 there might have been a structural break. The obtained current equity premium values are significantly higher than zero. At the same time they are lower than popularly used values that are based on longer periods of past data. The paper also finds out that equity premiums in different countries are highly correlated not only due to shared global influence but also due to some direct causality relationships between them, most of which are positive. A panel data analysis is conducted as well to test the explanatory power of some macroeconomic and financial variables on the equity risk premium values and it is concluded that risk-free rate and unemployment rate have some explanatory power for equity risk premium values. This paper manages to clear a part of the mystery that surrounds the equity risk premium.
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Köster, Michael. "Rekursive Präferenzen und das Equity-premium-Puzzle eine empirische Analyse des deutschen Kapitalmarkts." Marburg Metropolis-Verl, 2006. http://d-nb.info/98548604X/04.
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Köster, Michael. "Rekursive Präferenzen und das Equity Premium Puzzle : eine empirische Analyse des deutschen Kapitalmarkts /." Marburg : Metropolis, 2007. http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&doc_number=016164568&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA.
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Vivian, Andrew J. "The equity risk premium puzzle revisited : the case of the UK stock market." Thesis, Durham University, 2007. http://etheses.dur.ac.uk/2445/.
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This thesis stimulated and inspired by failings in the current literature investigates a series of issues relating to the UK Equity Risk Premium Puzzle. The UK market is focussed upon given prior research is heavily concentrated on the us market. The prior literature also focuses upon the aggregate equity premium. This thesis makes another important extension to prior work by analysing the equity premium for portfolios formed on cross-sectional characteristics such as size or industry. Specifically, it addresses the following three main issues. Firstly, is the historical equity premium an appropriate proxy for the expected equity premium? Secondly, does the use of the ex-post equity premium overstate the magnitude of the ex-ante equity premium puzzle? Thirdly, do low frequency equity returns follow different regimes over time? The main results indicate that the alignment of ex-post equity returns with fundamental measures of equity returns depends upon both the time period considered and the measure of fundamental used. Empirical evidence also supports the view that the expected equity premium follows different regimes and thus does vary over time. This low-frequency time variation in expected returns appears to, in general, be systematic, affecting portfolios within the market at a similar time. Our results contribute to the academic literature and also have important implications for practitioners by offering insight into the nature of the Equity Premium Puzzle and the appropriateness of using ex-post returns as a proxy for ex-ante returns.
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Cia, Josilmar Cordenonssi. "Saving-capm: uma proposta de solução para o equity premium puzzle do consumption-capm." reponame:Repositório Institucional do FGV, 2006. http://hdl.handle.net/10438/2587.
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Previous issue date: 2006-08-08T00:00:00ZEm 1985, Mehra e Prescott levantaram uma questão que até hoje não foi respondida de forma satisfatória: o prêmio de risco das ações americanas é muito maior do que poderia ser explicado pelo “paradigma neoclássico de finanças econômicas” (financial economics) representado pelo modelo C-CAPM. E, a partir de então, este problema não resolvido ficou conhecido como o “Equity Premium Puzzle” (EPP) ou o “Enigma do Prêmio (de risco) das Ações”. Este enigma estimulou a produção de uma série de artigos, dissertações e teses que tentaram ajustar os modelos intertemporais de utilidade esperada aos dados dos mercados financeiros. Dentro deste contexto, esta tese busca (i) revisar a evolução histórica da teoria dos modelos de maximização da utilidade intertemporal dos agentes, (ii) analisar os pressupostos e conceitos chaves desses modelos, (iii) propor um novo modelo que seja capaz de solucionar o EPP, (iv) aplicar este modelo proposto aos dados históricos anuais entre 1929 e 2004 e (v) validar a lógica deste modelo através das metodologias Mehra-Prescott e Hansen-Jagannathan. Esta tese faz uma crítica de que os estudos até aqui desenvolvidos tentaram explicar a dinâmica de um mercado financeiro altamente sofisticado, através de um modelo de economia não-monetária e de subsistência. Assim, a sua contribuição consiste na alteração desse pressuposto de uma economia de subsistência, considerando que a renda disponível do setor privado não seja integralmente consumida, mas que também possa ser poupada. Assumindo que as pessoas obtêm satisfação (utilidade) tanto pelo consumo atual como pela poupança atual (que será o consumo futuro), será deduzido que a utilidade marginal de consumir é igual à de poupar, em todo e qualquer período. Com base nisso, a utilidade marginal a consumir é substituída pela utilidade marginal de poupar dentro do modelo básico do C-CAPM. Para reforçar a idéia de que o modelo desta tese usa dados de poupança em vez de consumo, ao longo do trabalho ele será chamado de Sanving-CAPM, ou S-CAPM. Este novo modelo mostrou-se capaz de solucionar o EPP quando submetidas às abordagens Mehra-Prescott e Hansen-Jagannathan.
In 1985 Mehra and Prescott raised a question that has not been answered satisfactorily: the equity premium of American shares is much higher than it could be explained by the "neoclassical paradigm of financial economics" represented by CCAPM models. And, since then, this non-solved issue is known as the Equity Premium Puzzle (EPP). This puzzle has stimulated the production of a series of articles, theses and dissertations that tried to adjust the intertemporal expected utility models to the financial markets' data. In this context, this doctoral dissertation aims to (a) revise the historical evolution of model theory of maximization of intertemporal expected utility, (b) analyze the key assumptions and concepts of these models, (c) propose a new model that can solve the EPP, (d) apply the proposed model to the historical data between 1929 and 2004, and (e) validate the logic of this model through the MehraPrescott and Hansen-Jagannathan methodologies. This doctoral dissertation criticizes that the studies so far formulated have tried to explain the dynamics of highly sophisticated financial markets through a model of non-monetary exchange economy. Hence, its contribution consists of the changing of this assumption of a exchange economy considering that the available income of the private sector is not fully consumed, but rather also saved. Taking into account that people can obtain satisfaction (utility) with the present consumption as well as with the present savings (that will be the future consumption), it will be deduced that the marginal utility of consuming is replaced by the marginal utility of saving within the basic C-CAPM model. To reinforce this idea that the model of this doctoral dissertation uses data of savings rather than consumption, throughout the study it will be called Saving-CAPM or S-CAPM. This new model has proved to be capable of solving the EPP when submitted to the Mehra-Prescott and HansenJagannathan approaches.
13
Chandorkar, Pankaj. "A systematic review of the determinants and the behaviour of equity risk premium." Thesis, Cranfield University, 2013. http://dspace.lib.cranfield.ac.uk/handle/1826/12492.
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Understanding the Equity Risk Premium (ERP) and the factors affecting it is cardinal to financial economics, particularly to equity research analysts, domestic and international institutional investors and financial economist. Since the seminal work of Mehra and Prescott (1985) there has been an exponential rise in the research explaining the reasons for ERP puzzle. This review, systematically, investigates the literature related to ERP in four key dimensions. The first dimension is regarding the issues related to different techniques of estimating the ERP. The second dimension is regarding the studies that explain the reasons of existence of the ERP puzzle by making modifications to the preference structures. The third is regarding the macroeconomic variables that help in predicting ERP and the fourth deals with studies that are conducted in the international context. In addition to this, this review meticulously captures some important limitations of the existing literature regarding the estimation of ERP and identifies the domestic and international determinants of ERP, in particular the UK ERP and proposes novel future directions of research. These future research directions have two important implications for my PhD. The first is the academic contribution that predominantly comes from methodological contribution of estimating the ERP. The second is the practical contribution that comes mainly from identifying the unique set of variables (UK domestic and international), which are of prime importance to the domestic and foreign institutional investors because of the financial crisis of 2008-2009 and which should affect the UK ERP.
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SANTOS, ROBSON CABRAL DOS. "ANALYSIS AND VALUATION OF EQUITY PREMIUM PUZZLE IN THE BRAZILIAN STOCK MARKETS UNDER DIFFERENT ECONOMIC CONTEXTS." PONTIFÍCIA UNIVERSIDADE CATÓLICA DO RIO DE JANEIRO, 2006. http://www.maxwell.vrac.puc-rio.br/Busca_etds.php?strSecao=resultado&nrSeq=8900@1.
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PONTIFÍCIA UNIVERSIDADE CATÓLICA DO RIO DE JANEIROO Equity Premium Puzzle tem sido muito estudado no mundo desde 1985, ano da publicação do trabalho de Mehra e Prescott. O intuito desta dissertação foi fazer uma análise e avaliação do Equity Premium Puzzle utilizando diferentes contextos vividos na economia brasileira no período de 1990 até 2005. O modelo utilizado foi o do agente representativo com utilidade separável no tempo desenvolvido por Mehra e Prescott (1985). A fim de realizar comparações de resultados foi utilizado também o modelo revisado por Mehra (2003) e um modelo com utilidade tipo Kreps - Porteus com processo de dotação seguindo a cadeia de Markov.
The Equity Premium Puzzle has been very studied in the world since 1985, year of the publication of the work of Mehra and Prescott. The intention of this dissertation was to make an analysis and valuation of the Equity Premium Puzzle being used different contexts lived in the Brazilian economy in the period of 1990 up to 2005. It was used the representative agent model with separable utility in the time developed for Mehra and the Prescott (1985). In order to carry through comparisons of results was used also the model revised for Mehra (2003) and a model with utility type Kreps - Porteus with endowment process having followed the Markov´s chain.
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Tian, Shu. "Essays on Stock Market Liquidity and Liquidity Risk Premium." ScholarWorks@UNO, 2010. http://scholarworks.uno.edu/td/1153.
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This dissertation addresses issues concerning liquidity and its volatility. It consists of two essays. The first essay, "Liquidity, Macro Factors and the U.S. Equity Flows to Emerging Markets", examines the role of liquidity on equity flows from the U.S. to fifteen emerging markets around the world. Since liquidity has many dimensions, an emphasis is placed on utilizing various measures of liquidity. Moreover, both static and dynamic analyses, as well as short and long-horizon regressions, are performed to investigate the research questions. The results suggest that a liquid market attracts flows, after controlling for market size, political openness, exchange rate and other macro factors. Additionally, evidence indicates that the importance of liquidity varies across regions. For instance in the Asian region, the relation between equity flows and volume-related liquidity is weak while that between flows and price impacts of trading is strong. Evidence also supports the relevance of macro factors such as a country's economic freedom. The second essay, "Liquidity Risk Premium Puzzle and Possible Explanations", attempts to resolve the liquidity risk puzzle: a negative relation between returns and liquidity risk, documented by Chordia, Subrahmanyam, and Anshuman (2001b), by employing alternative liquidity measures and by incorporating factors that might potentially affect the relation. The main findings are as follows. The relation between stock returns and volatility of liquidity depends on the measure of liquidity. When liquidity measures are based on trading volume, the results are largely mixed, but when liquidity is measured based on price impact of trading, the relation between returns and volatility of price impacts is positive, as expected. The results are sensitive to time periods examined. Moreover, during extreme down markets, the aversion to liquidity volatility is lower, suggesting behavioral bias might potentially address the puzzle. Empirical findings also suggest that liquidity risk premium tends to be greater for small stocks. Finally, when the VIX index is included as a proxy for investor sentiment, the results indicate that the relation between returns and liquidity risk is significantly positive in four out of five liquidity measures. In sum, the empirical analysis partially but not completely addresses the puzzle.
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Vasconcelos, Jivago B. Ximenes de. "Can a habit formation model really explain the Forward Premium Anomaly?" reponame:Repositório Institucional do FGV, 2009. http://hdl.handle.net/10438/2714.
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Verdelhan (2009) shows that if one is to explain the foreign ex- change forward premium behavior using Campbell and Cochrane (1999) s habit formation model one must specify it in such a way to generate pro-cyclical short term risk free rates. At the calibration procedure, we show that this is only possible in Campbell and Cochrane s framework under implausible parameters speci cations given that the priceconsumption ratio diverges in almost all parameters sets. We, then, adopt Verdelhan s shortcut of xing the sensivity function (st) at its steady state level to attain a nite value for the price-consumption ratio and release it in the simulation stage to ensure pro-cyclical risk free rates. Beyond the potential inconsistencies that such procedure may generate, as suggested by Wachter (2006), with pro-cyclical risk free rates the model generates a downward sloped real yield curve, which is at odds with the data.
Verdelhan (2009) mostra que desejando-se explicar o comporta- mento do prêmio de risco nos mercados de títulos estrangeiros usando- se o modelo de formação externa de hábitos proposto por Campbell e Cochrane (1999) será necessário especificar o retorno livre de risco de equilíbrio de maneira pró-cíclica. Mostramos que esta especificação só é possível sobre parâmetros de calibração implausíveis. Ainda no processo de calibração, para a maioria dos parâmetros razoáveis, a razão preço-consumo diverge. Entretanto, adotando a sugestão proposta por Verdelhan (2009) - de xara função sensibilidade (st) no seu valor de steady-state durante a calibração e liberá-la apenas durante a simulação dos dados para se garantir taxas livre de risco prócíclicas - conseguimos encontrar um valor nito e bem comportado para a razão preço-consumo de equilíbrio e replicar o foward premium anomaly. Desconsiderando possíveis inconsistências deste procedimento, sobre retornos livres de risco pró-cíclicos, conforme sugerido por Wachter (2006), o modelo utilizado gera curvas de yields reais decrescentes na maturidade, independentemente do estado da economia - resultado que se opõe à literatura subjacente e aos dados reais sobre yields.
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MAGI, Alessandro. "Comportamento dei mercati azionari e scelte e scelte di portafoglio in una prospettiva di finanza comportamentale." Doctoral thesis, La Sapienza, 2005. http://hdl.handle.net/11573/917402.
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Häfke, Christian, and Leopold Sögner. "Asset pricing under asymmetric information." SFB Adaptive Information Systems and Modelling in Economics and Management Science, WU Vienna University of Economics and Business, 1999. http://epub.wu.ac.at/688/1/document.pdf.
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This article investigates the impacts of asymmetric information within a Lucas (1978) asset pricing economy. Asymmetry enters via the assumption that one group of agents is equipped with superior information about the dividend process. The agents maximize their lifetime utility of the underlying consumption process obtained from the agents' budget constraints, where the agents have the opportunity to invest in a risk asset to transfer income from the current to future periods. Since a closed form solution for the market price cannot be derived analytically, projection methods are applied, as described in Judd (1998), to approximate the expectation integrals in the agents' Euler equation. We derive the result that the informed trader only clearly improves his situation as compared to the non-trade situation if the uninformed trader only observes his own endowment but not the endowment of the informed trader. In the case where agents observe each others' endowment trade never results in a Pareto improvement. (auhtor's abstract)Series: Working Papers SFB "Adaptive Information Systems and Modelling in Economics and Management Science"
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Guimarães, João Felipe Cury. "Existe puzzle de prêmio de risco acionário (EPP) no mercado brasileiro?: uma análise do período entre 1995 e 2013." reponame:Repositório Institucional do FGV, 2014. http://hdl.handle.net/10438/12047.
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Segundo Sampaio (2002), os modelos intertemporais de equilíbrio começaram a ter a sua eficácia na determinação do retorno dos ativos questionada após a publicação do artigo de Mehra e Prescott em 1985. Tendo como objeto de análise os dados observados no mercado norte-americano, os autores não foram capazes de reproduzir a média histórica do prêmio do retorno das ações em relação ao retorno dos títulos públicos de curto prazo através de parâmetros comportamentais dentro de intervalos considerados plausíveis. Através das evidências, os autores, então, puderam verificar a necessidade de coeficientes exageradamente altos de aversão ao risco para equiparação do prêmio de risco histórico médio das ações norte-americanas, enigma que ficou conhecido como equity premium puzzle (EPP). Foi possível também a constatação de outro paradoxo: a necessidade de taxas de desconto intertemporais negativas para obtenção da média histórica da taxa de juros, o risk-free rate puzzle (RFP). Este trabalho tem como objetivo adaptar os dados do modelo proposto por Mehra e Prescott (2003) ao mercado brasileiro e notar se os puzzles apresentados anteriormente estão presentes. Testa-se o CCAPM com dados brasileiros entre 1995:1 e 2013:4 adotando preferências do tipo utilidade esperada e através da hipótese de log-normalidade conjunta dos retornos. Utiliza-se o método de calibração para avaliar se há EPP no Brasil. Em linha com alguns trabalhos prévios da literatura nacional, como Cysne (2006) e Soriano (2002) que mostraram a existência do puzzle nos períodos de 1992:1-2004:2 e 1980:1-1998:4, respectivamente, conclui-se que o modelo usado por Mehra e Prescott (2003) não é capaz de gerar o prêmio de risco observado na economia brasileira. Sampaio (2002), Bonomo e Domingues (2002) e Issler e Piqueira (2002), ao contrário, não encontram evidências da existência de um EPP brasileiro.
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Guimarães, Pedro Henrique Engel. "Three essays on macro-finance: robustness and portfolio theory." reponame:Repositório Institucional do FGV, 2017. http://hdl.handle.net/10438/19926.
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This doctoral thesis is composed of three chapters related to portfolio theory and model uncertainty. The first paper investigates how ambiguity averse agents explain the equity premium puzzle for a large group of countries including both Advanced Economies (AE) and Emerging Markets (EM). In the second article, we develop a general robust allocation framework that is capable of dealing with parametric and non parametric asset allocation models. In the final paper, I investigate portfolio selection criteria and analyze a set of portfolios out of sample performance in terms of Sharpe ratio (SR) and Certainty Equivalent (CEQ)
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Faria, Adriano Augusto de. "Essays in empirical finance." reponame:Repositório Institucional do FGV, 2017. http://hdl.handle.net/10438/19503.
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This thesis is a collection of essays in empirical finance mainly focused on term structure models. In the first three chapters, we developed methods to extract the yield curve from government and corporate bonds. We measure the performance of such methods in pricing, Value at Risk and forecasting exercises. In its turn, the last chapter brings a discussion about the effects of different metrics of the optimal portfolio on the estimation of a CCAPM model.In the first chapter, we propose a segmented model to deal with the seasonalities appearing in real yield curves. In different markets, the short end of the real yield curve is influenced by seasonalities of the price index that imply a lack of smoothness in this segment. Borrowing from the flexibility of spline models, a B-spline function is used to fit the short end of the yield curve, while the medium and the long end are captured by a parsimonious parametric four-factor exponential model. We illustrate the benefits of the proposed term structure model by estimating real yield curves in one of the biggest government index-linked bond markets in the world. Our model is simultaneously able to fit the yield curve and to provide unbiased Value at Risk estimates for different portfolios of bonds negotiated in this market.Chapter 2 introduces a novel framework for the estimation of corporate bond spreads based on mixture models. The modeling methodology allows us to enhance the informational content used to estimate the firm level term structure by clustering firms together using observable firm characteristics. Our model builds on the previous literature linking firm level characteristics to credit spreads. Specifically, we show that by clustering firms using their observable variables, instead of the traditional matrix pricing (cluster by rating/sector), it is possible to achieve gains of several orders of magnitude in terms of bond pricing. Empirically, we construct a large panel of firm level explanatory variables based on results from a handful of previous research and evaluate their performance in explaining credit spread differences. Relying on panel data regressions we identify the most significant factors driving the credit spreads to include in our term structure model. Using this selected sample, we show that our methodology significantly improves in sample fitting as well as produces reliable out of sample price estimations when compared to the traditional models.Chapter 3 brings the paper “Forecasting the Brazilian Term Structure Using Macroeconomic Factors”, published in Brazilian Review of Econometrics (BRE). This paper studies the forecasting of the Brazilian interest rate term structure using common factors from a wide database of macroeconomic series, from the period of January 2000 to May 2012. Firstly the model proposed by Moench (2008) is implemented, in which the dynamic of the short term interest rate is modeled using a Factor Augmented VAR and the term structure is derived using the restrictions implied by no-arbitrage. Similarly to the original study, this model resulted in better predictive performance when compared to the usual benchmarks, but presented deterioration of the results with increased maturity. To avoid this problem, we proposed that the dynamic of each rate be modeled in conjunction with the macroeconomic factors, thus eliminating the no-arbitrage restrictions. This attempt produced superior forecasting results. Finally, the macro factors were inserted in a parsimonious parametric three-factor exponential model.The last chapter presents the paper “Empirical Selection of Optimal Portfolios and its Influence in the Estimation of Kreps-Porteus Utility Function Parameters”, also published in BRE. This paper investigates the effects on the estimation of parameters related to the elasticity of intertemporal substitution and risk aversion, of the selection of different portfolios to represent the optimal aggregate wealth endogenously derived in equilibrium models with Kreps-Porteus recursive utility. We argue that the usual stock market wide index is not a good portfolio to represent optimal wealth of the representative agent, and we propose as an alternative the portfolio from the Investment Fund Industry. Especially for Brazil, where that industry invests most of its resources in fixed income, the aforementioned substitution of the optimal proxy portfolio caused a significant increase in the risk aversion coefficient and the elasticity of the intertemporal substitution in consumption.
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Matos, Paulo Rogério Faustino. "Essays on the relationship between the equity and the forward premium puzzles." reponame:Repositório Institucional do FGV, 2006. http://hdl.handle.net/10438/1028.
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Previous issue date: 2006-12-11Our research agenda consists in showing this strong relation between these puzzles based on evidences that both empirical failures are related to the incapacity of the canonical CCAPM to provide a high volatile intertemporal marginal rate of substitution with reasonable values for the preferences parameters.
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Raciborski, Rafal. "Topics in macroeconomics and finance." Doctoral thesis, Universite Libre de Bruxelles, 2014. http://hdl.handle.net/2013/ULB-DIPOT:oai:dipot.ulb.ac.be:2013/209211.
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The thesis consists of four chapters. The introductory chapter clarifies different notions of rationality used by economists and gives a summary of the remainder of the thesis. Chapter 2 proposes an explanation for the common empirical observation of the coexistence of infrequently-changing regular price ceilings and promotion-like price patterns. The results derive from enriching an otherwise standard, albeit stylized, general equilibrium model with two elements. First, the consumer-producer interaction is modeled in the spirit of the price dispersion literature, by introducing oligopolistic markets, consumer search costs and heterogeneity. Second, consumers are assumed to be boundedly-rational: In order to incorporate new information about the general price level, they have to incur a small cognitive cost. The decision whether to re-optimize or act according to the obsolete knowledge about prices is itself a result of optimization. It is shown that in this economy, individual retail prices are capped below the monopoly price, but are otherwise flexible. Moreover, they have the following three properties: 1) An individual price has a positive probability of being equal to the ceiling. 2) Prices have a tendency to fall below the ceiling and then be reset back to the cap value. 3) The ceiling remains constant for extended time intervals even when the mean rate of inflation is positive. Properties 1) and 2) can be associated with promotions and properties 1) and 3) imply the emergence of nominal price rigidity. The results do not rely on any type of direct costs of price adjustment. Instead, price stickiness derives from frictions on the consumers’ side of the market, in line with the results of several managerial surveys. It is shown that the developed theory, compared to the classic menu costs-based approach, does better in matching the stylized facts about the reaction of individual prices to inflation. In terms of quantitative assessment, the model, when calibrated to realistic parameter values, produces median price ceiling durations that match values reported in empirical studies.The starting point of the essay in Chapter 3 is the observation that the baseline New-Keynesian model, which relies solely on the notion of infrequent price adjustment, cannot account for the observed degree of inflation sluggishness. Therefore, it is a common practice among macro- modelers to introduce an ad hoc additional source of persistence to their models, by assuming that price setters, when adjusting a price of their product, do not set it equal to its unobserved individual optimal level, but instead catch up with the optimal price only gradually. In the paper, a model of incomplete adjustment is built which allows for explicitly testing whether price-setters adjust to the shocks to the unobserved optimal price only gradually and, if so, measure the speed of the catching up process. According to the author, a similar test has not been performed before. It is found that new prices do not generally match their estimated optimal level. However, only in some sectors, e.g. for some industrial goods and services, prices adjust to this level gradually, which should add to the aggregate inflation sluggishness. In other sectors, particularly food, price-setters seem to overreact to shocks, with new prices overshooting the optimal level. These sectors are likely to contribute to decreasing the aggregate inflation sluggishness. Overall, these findings are consistent with the view that price-setters are boundedly-rational. However, they do not provide clear-cut support for the existence of an additional source of inflation persistence due to gradual individual price adjustment. Instead, they suggest that general equilibrium macroeconomic models may need to include at least two types of production sectors, characterized by a contrasting behavior of price-setters. An additional finding stemming from this work is that the idiosyncratic component of the optimal individual price is well approximated by a random walk. This is in line with the assumptions maintained in most of the theoretical literature.
Chapter 4 of the thesis has been co-authored by Julia Lendvai. In this paper a full-fledged production economy model with Kahneman and Tversky’s Prospect Theory features is constructed. The agents’ objective function is assumed to be a weighted sum of the usual utility over consumption and leisure and the utility over relative changes of agents’ wealth. It is also assumed that agents are loss-averse: They are more sensitive to wealth losses than to gains. Apart from the changes in the utility, the model is set-up in a standard Real Business Cycle framework. The authors study prices of stocks and risk-free bonds in this economy. Their work shows that under plausible parameterizations of the objective function, the model is able to explain a wide set of unconditional asset return moments, including the mean return on risk-free bonds, equity premium and the Sharpe Ratio. When the degree of loss aversion in the model is additionally assumed to be state-dependent, the model also produces countercyclical risk premia. This helps it match an array of conditional moments and in particular the predictability pattern of stock returns.
Doctorat en Sciences économiques et de gestion
info:eu-repo/semantics/nonPublished
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Kim, Young Il. "Essays on Volatility Risk, Asset Returns and Consumption-Based Asset Pricing." The Ohio State University, 2008. http://rave.ohiolink.edu/etdc/view?acc_num=osu1211912340.
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HSU-HSIEN, CHU, and 朱書賢. "The Equity Premium Puzzle." Thesis, 2005. http://ndltd.ncl.edu.tw/handle/30232468543772567839.
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碩士國立清華大學
科技管理研究所
93
Since the equity premium puzzle was identified by Mehra and Prescott (1985), many papers in this literature has started to discuss this phenomenon and the subsequent problem- risk-free rate puzzle. In accordance with standard asset-pricing theory, if we want to estimate precisely asset prices, it’s necessary for us to calculate correctly the appropriate discount factor and the future cash flow. Unfortunately, many scholars often discuss the equity premium puzzle from the only one viewpoint. Therefore we apply habit formation model to estimate the discount factor and model the cash flow by allowing aggregate dividends to differ from aggregate consumption. In benchmark scenario, we also show that the jump in surplus consumption ratio plays a critical role in expounding the equity premium puzzle and the risk-free rate puzzle.
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Chang, Chen-Hsiu, and 張鎮修. "The Study of Equity Premium Puzzle in Taiwan." Thesis, 2005. http://ndltd.ncl.edu.tw/handle/82081027059279754354.
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碩士國立成功大學
國際企業研究所碩博士班
93
In this paper, we investigated the equity premium and consumption behavior of Taiwanese from January 1976 through December 2003. As well known, Taiwan is a booming economy and the investors who invest in Taiwan are compensated for bearing the risks in terms of higher average returns. The empirical results showed the equity premium was higher than any other developed countries and was inconsistent with the predictions of the model. Therefore, we found that Taiwan had the equity premium puzzles. Then according to Mckenzie (2001) viewpoint about Taiwanese consumption behavior, he showed that the rapidly consumption growth in Taiwan is due to both the precautionary savings and the habit formation. Uncertainty about future income is a more important determinant of precautionary saving in Taiwan than in the developed nation. Therefore, we investigated that whether the equity premium puzzle could be explained by the model with incomplete insurance and the model with habit formation. We presented the evidence that the premium were explained with the stochastic discount factor (SDF) developed by Brav, Constantinides and Geczy (2002) and presented in terms of the weighted average of the individual households’ marginal rate of substitution with the reasonable values of relative risk aversion, which supported the hypothesis of incomplete consumption insurance. Moreover, we also tested for the model with heterogeneous consumers developed by Constantinides and Duffic (1996) and found that the result was also robustness for the incomplete consumption insurance. Moreover, we investigated the limited participation of households in the capital market under complete consumption insurance model. Our results implied that each income group had larger percentage of Taiwanese household owns common stocks so that they could explain the equity premium puzzles. On the other hand, when we estimated the model of habit formation, we found that the model with habit formation alone could not explain the equity premium puzzles in Taiwan.
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Chou, Hsi-En, and 周熙恩. "Housing Disasters, Economic Disasters, and Equity Premium Puzzle." Thesis, 2011. http://ndltd.ncl.edu.tw/handle/01463595843758356332.
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碩士國立臺灣大學
土木工程學研究所
99
Subprime Mortgage Crisis due to the housing market bubble which lead to economic recession and the stock market crash, causing the severity of impact. Therefore, this study is to analyze in the disasters, the relationship between the housing market, economy, and the stock market. To understand the changes in stock market assets, whether will be affected by the housing market and economic disaster information. Second, consider the disasters information to the asset pricing model to test the disaster events in real estate market, to explain how much of the stock investor behavior, and compare information with economic disaster. The study use a more objective numerical methods (Bry-Boschan methods and Helbling and Terrones methods) to identify twenty developed countries which the top 1/4 ranking of the contractions are disasters. The study results show that in the hosuing market disaster or economic disaster environment, the stock have negative returns over 90%, and the shock market have the chances of disaster are about 50%, the average decrease of -20%, which appears the disaster situation is clearly reflected in the stock returns in the disaster environment. On the other hand, between the housing market and economic disaster are influenced by the fluctuation of each other. When one disaster, the other nearly half of the probability of a disaster, shows that the two may be accompanied with a disaster occur. Test the model under consideration of disaster information, whether the CCAPM can explain “Equity Premium Puzzle” proposed model to estimate the value of less than 6.18% equity risk premium value. Empirical results in the consideration of disaster information model compares to the traditional model of Lucas can further explain this premium issue. Information in the application of economic disasters explain 6.83% of the risk premium value, and consider the housing market disasters information is able to explain the 3.39% risk premium value. This shows that, after consideration of disaster information to make the model better describes the phenomenon of risk return, and economic disaster information can explain why most stock investors require higher risk premiums, and the housing market disaster information can supplement the missing part of the economic side of the disaster information. Two kinds of disaster at the same time considerations, the reasonable value of the equity risk premium of 7.5% can be considered for stock investors more information about the disaster effects, proposed a reasonable risk premium.
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Serra, Rui Duarte Bernardes. "O puzzle de risco accionista - uma revisão da literatura com uma aplicação a Portugal." Master's thesis, 2003. http://hdl.handle.net/10400.5/17728.
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Mestrado em Economia Monetária e FinanceiraEsta dissertação debruça-se sobre o prémio de risco do mercado accionista (Equity Premium Puzzle- EPP): a rendibilidade em excesso das acções face aos activos sem risco é demasiado elevada para os níveis de aversão ao risco e de volatilidade do consumo considerados normais, numa economia sem fricções e com mercados completos. ias nos :om laiS 2 Desde que a temática foi iniciada por Mehra e Prescott (1985], diversas soluções foram apontadas, quer com mercados perfeitos e agentes optimizadores, quer com mercados imperfeitos, quer com agentes não inteiramente racionais. De modo a averiguar se o EPP é um fenómeno exclusivo das economias mms avançadas, com mercados de capitais desenvolvidos, testamos para Portugal, se no período 1977-2001 se verificou este puzzle. Os resultados confirmam a existência do puzzle, ainda que o rácio de Sharpe seja baixo.
This dissertation analyses the Equity Premium Puzzle- EPP. The puzzle exists because the excess of stock returns over the risk-free rate is larger than can be explained by standard models of rational asset prices in a frictionless economy with complete markets. Since Mehra and Prescott [1985] influential study, many authors have attempted to solve this puzzle following different strategies: in a perfect market environment, with imperfect markets and with a behavioral finance framework. I investigate the existence ofthis puzzle for Portugal in the period 1977-2001. I find that there is a puzzle even with a low Sharpe ratio.
N/A
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Chen, Chiao-Fen, and 陳巧芬. "An Empirical Study on Equity Premium Puzzle in Taiwan Stock Market." Thesis, 2002. http://ndltd.ncl.edu.tw/handle/54434653916044672311.
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碩士國立交通大學
管理科學系
90
There are some anomalies in the stock market, such as the calendar effect、sector effect and excess return etc. Among these anomalies, excess return is always the important subject in the field of equity market. As we all learn that the equity return on equities remains higher than that on bonds. But so far, the historical research on the equity premium is based on the vision of CAPM, and tries to explain the anomalies through the aspect of the high risk existing in the equity market. The result reveals that risk is the main factor to successfully explain the excess return in stock market. Recently, some researchers find that the high degree of equity premium in stock market has been beyond the explanatory ability of the risk and the fact is that except the systematic risk, there must exist some other factors that could also make a good explanation of the equity premium. And this concept induces a new direction and lets us resurvey the topic of equity premium from a new vision. The purpose of this thesis is to study the equity premium puzzle in Taiwan Stock Market. Historically returns from the equity market remain higher than those from the bond market, even after considering the risk factor. In this research the relationship between the independent variables（wage、education、age）and the dependent variable（equity index return in Taiwan stock market）are explored. We propose an explanation for the equity premium puzzle through the aspects of the borrowing constraints、information asymmetry and the limited participation in the capital market. The conclusion supports our hypothesis.
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Hartmann, Nora [Verfasser]. "Dividendenpolitik und das Equity-Premium-Puzzle bei beschränkter Kapitalgeberrationalität / von Nora Hartmann." 2004. http://d-nb.info/97119565X/34.
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Wang, Ya-Hsuan, and 王雅璇. "The Analysis of Equity Risk Premium And Volatility Puzzle-A Case of Taiwan Stock Market." Thesis, 2017. http://ndltd.ncl.edu.tw/handle/2y22wv.
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碩士國立高雄應用科技大學
金融系金融資訊碩士班
105
The aim of this paper is to analyze the equity premium and volatility puzzle in the Taiwan stock market. The sample period is from 1976 to 2015. Drawing upon Nicholas Barberis, Ming Huang and Tano Santos (2001), we use rational consumption-based model and prospect theory model to estimate equity premium and volatility, and compare these estimated numbers with historical values. The empirical results are as follows: First, the historical equity premium is 2.352% and the volatility is 36.12%, while the premium and volatility estimated by the consumption-based model are 0.017% and 33.97% respectively. Therefore, there is equity premium puzzle in the Taiwan stock market. The return volatility can be nearly explained by the volatility of dividend growth rate, so volatility puzzle is not serious in the Taiwan stock market. Second, prospect theory model can fully explain the equity premium. When the adjustment factor of the value function is set to 0.2, the estimated premium reaches 2.68%. In estimating the equity premium and volatility, it is assumed that price-divided ratio (P/D) is a constant. Since price-divided ratio is time-varying, we adopt three methods to estimate the time series of P/D ratio and calculate the corresponding forecasted returns. It is found that the forecasted average return by static prediction fits the historical mean return better than predicting by regression models, but static prediction seriously underestimates the return volatility. Besides, static prediction results in the lowest MAE, RMSE, and MAPE.
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Malamud, Semyon. "Asset pricing for idiosyncratically incomplete markets /." 2006. http://e-collection.ethbib.ethz.ch/show?type=diss&nr=16651&part=abstracts.
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Freeman, Mark C. "Can market incompleteness resolve asset pricing puzzles?" 2009. http://hdl.handle.net/10454/2771.
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NoThis paper shows that the presence of persistent uninsurable risk concentrated in economic depressions has the potential to resolve two well¿known asset pricing puzzles. It is also shown that the presence of such risk in more normal economic expansions and recessions is likely to be much less relevant in determining equilibrium asset prices.
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Dorfner, Peter. "Is the equity premium puzzle just a lack of foresight? The impact of targeting on myopic loss a aversion." Master's thesis, 2018. http://hdl.handle.net/10362/48479.
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Imagine an individual facing three identical investment decisions in a row. Each time she
decides on how much to invest in a risky asset or save. Also, imagine the same individual deciding
about three consecutive investments at once. Equal for rational investors, when suffering Myopic
Loss Aversion, the latter scenario is perceived differently though: More is invested when payoffs
are evaluated over a greater time horizon. Based on the theory of reference points I proposed a
novel method – investment targets – to shift attention to longer-term goals. I find that exogenously
proposed targets eliminate Myopic Loss Aversion in an experiment.
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RACZKO, Marek. "Essays in international finance and applied econometrics." Doctoral thesis, 2016. http://hdl.handle.net/1814/40704.
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Defence date: 4 April 2016Examining Board: Prof. Evi Pappa, EUI, Supervisor; Prof. Agustín Bénétrix, Trinity College Dublin; Prof. Christian Brownlees, Universitat Pompeu Fabra; Prof. Peter Hansen, EUI.
The thesis consists of three essays in the fields of international finance and applied econometrics. The first chapter analyzes the co-movement of market premia for rare adverse events, addressing the important issue of contagion. The second chapter studies the impact of rare adverse events on the estimates of the risk-aversion coefficient and on household's portfolio composition. This chapter shows that the threat of a rare disaster justifies household's positive bond holdings. Finally, the last chapter studies if the information not contained in the domestic yield curve, but contained in the foreign yield curve helps to predict future dynamics of domestic yields. The first chapter proposes a novel approach to assessing volatility contagion across equity markets. More specifically I decompose the variance risk premia of three major stock indices into: crash and non-crash risk components and analyse their cross-market correlations. I find that crash-risk premia exhibit higher correlations than non-crash risk premia, implying the existence of volatility contagion. This suggests that investors believe that equity returns will be more highly correlated across countries during market crashes than during more normal times. The main result of the analysis holds when I apply other measures of co-movement as well as when I allow correlation to be time varying. Moreover I document that crash-premia constitute a large portion of the overall variance risk premia, highlighting the importance of crash-risks. Unlike the existing literature, my approach to testing the existence of volatility contagion does not rely on short periods of financial distress, but allows for crash-risk premia to be computed in tranquil times. The second chapter assesses the impact of the Peso problem on the econometric estimates of the risk aversion coefficient. Rietz (1988) and subsequently Barro (2006) showed that the introduction of the crash risk allows the canonical general equilibrium framework to generate data consistent equity premia even under low risk aversion of the representative agents. They argue that the original data used to calibrate these models suffer from a Peso problem (i.e. does not encounter a crash state). To the best of my knowledge the impact of their Peso problem on the estimation of the risk aversion coefficient has not to date been evaluated. This chapter seeks to remedy this. I find that crash states that are internalized by economic agents, but are not realized in the sample, generate only a small bias in the estimates of the risk aversion coefficient. I also show that the introduction of the crash state has a strong bearing on the household's portfolio composition. In fact, under the internalized crash state scenario, households exhibit positive bond holdings even in a frictionless environment. In the third chapter, co-authored with Andrew Meldrum and Peter Spencer, we show, using data on government bonds in Germany and the US, that 'overseas unspanned factors' - constructed from the components of overseas yields that are uncorrelated with domestic yields - have significant explanatory power for subsequent domestic bond returns. This result is remarkably robust, holding for different sample periods, as well as out of sample. By adding our overseas unspanned factors to simple dynamic term structure models, we show that shocks to those factors have large and persistent effects on domestic yield curves. Dynamic term structure models that omit information about foreign bond yields are therefore likely to be mis-specified.
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Fernandes, Marco Biscaia. "Contributos para a explicação dos puzzles equity premium e risk free rate a partir do modelo recursivo epstein-zin-weil: uma análise empírica." Doctoral thesis, 2015. http://hdl.handle.net/10071/10663.
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Classificação JEL: C52, C58, E21, E44, G12A partir do modelo Epstein-Zin-Weil (EZW), que separa o Coeficiente Relativo de Aversão ao Risco (CRAR) da Elasticidade Intertemporal de Substituição (EIS) do consumo, estudou-se a adequabilidade empírica na explicação dos retornos dos activos e variação do consumo, atendendo à importância da resolução dos puzzles relacionados com o Equity Premium. Para tal, partiu-se do trabalho de Zhang (2006), que estimou o modelo EZW considerando o cálculo do portfólio óptimo (incluindo o capital humano) em detrimento da utilização do portfólio de mercado como proxy. Aplicaram-se três métodos distintos de estimação e inferência estatística (GEL, Kleibergen e restrições de momento condicionais – todos estes novos contributos à literatura EZW), a duas amostras, uma parcial até 2001 no sentido de comparar com o trabalho de Zhang e outra actualizada até 2013, tendo-se ainda considerado quatro conjuntos distintos de instrumentos: Zhang (2006), Stock e Wright (2000), Yogo (2004) e Chen, Favilukis e Ludvigson (2013). As estimações do modelo EZW com recurso ao método GEL por comparação com o GMM, confirmam a pertinência empírica do modelo, em especial nos casos da utilização dos instrumentos de Yogo e Zhang, evidenciando-se a significância estatística dos modelos estimados, e valores plausíveis para o CRAR e EIS, em geral abaixo de 10 e em torno da unidade, respectivamente. No âmbito da estimação por intervalos, com recurso à estatística de Kleibergen (2005) robusta a weak identification, os resultados foram no mesmo sentido, em especial para os instrumentos de Yogo. Quanto às estimações que consideram restrições de momento condicionais, conclui-se que confirmam os resultados anteriores, apesar de serem métodos computacionalmente difíceis de aplicar face à não linearidade acentuada do modelo. Relacionaram-se as estimações dos Stochastic Discount Factors (SDF´s), no âmbito das restrições de momento condicionais, com os ciclos económicos, e concluiu-se que em períodos de recessão os SDF´s aumentam, fruto das precautionary savings realizadas pelos consumidores perante incerteza quanto ao rendimento, adiando consumo (poupando e investindo em activos) para quando o consumo marginal for mais valorizado. Dois períodos recentes onde este fenómeno aconteceu foi na crise do sub-prime em 2008 e das dívidas soberanas em 2011. Com os resultados obtidos nas estimações, sugere-se que o modelo EZW, com cálculo do portfólio da riqueza conforme Zhang (2006), é relevante na explicação do valor dos activos financeiros, bem como na resolução do equity premium e risk free rate puzzles.
Considering the Epstein-Zin-Weil Model (EZW), which separates the Relative Risk Aversion (RRA) and the Consumption Elasticity Intertemporal Substitution (EIS) coefficients, we studied the empirical adequacy in explaining the assets returns and consumption changes, in order to shed some light about the Equity Premium related puzzles. We follow the work of Zhang (2006), who estimated the EZW model including human capital in the calculation of the optimal portfolio instead of the usual proxy - market portfolio. In the empirical work we applied three different estimation and statistical inference methods (GEL, Kleibergen and conditional moment restrictions estimation - all these new contributions to EZW literature), considering two samples, until 2001 in order to compare to Zhang’s work and the updated untill 2013, and also considering four distinct sets of instruments: Zhang (2006), Stock and Wright (2000), Yogo (2004) and Chen, Favilukis and Ludvigson (2013). The EZW model estimation results, using the GEL method and comparing with GMM, confirm the empirical relevance of the model, particularly using Yogo and Zhang instruments, showing the statistical significance of the estimated models, and plausible values for the RRA and EIS coefficients, generally below 10 and around 1, respectively. Similar conclusions are obtained when considering the confidence sets robust to weak identification of Kleibergen (2005), especially for the Yogo instruments. Regarding the estimations that consider the model’s conditional moment restrictions, in general, they confirm the previous results, although these methods are computationally difficult to apply, given the sharp non linearity of the EZW model. Comparing the estimations of the Stochastic Discount Factors (SDF's), under the conditional moment restrictions, with economic cycles, we conclude that during recessions the SDF's increase, in result of consumers precautionary savings facing uncertainty about income, adding consumption (savings invested in assets) for when marginal consumption is valuable. Recently, we observed this phenomenon in 2008 sub-prime crisis and in 2011 sovereign debts crisis. Considering the estimations results obtained, it is suggested that the EZW model with the calculation of the wealth portfolio as in Zhang (2006) is relevant in explaining the asset prices, as well as a possible resolution of the equity premium and risk free rate puzzles.
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Hrachovec, Miloš. "Záhada prémie vlastního kapitálu: přehled literatury a česká data." Master's thesis, 2013. http://www.nusl.cz/ntk/nusl-329079.
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This thesis focuses on the equity premium puzzle, risk-free rate puzzle and possible solutions of these two quantitative conundrums. Original formulation of both puzzles is introduced and comprehensive literature survey is presented to show the developments regarding this topic. These include risk-based explanations, non-risk based explanations and behavioral finance perspective. Main contribution of this study dwells in estimation of these two puzzles for the Czech Republic. Using consumption-based asset pricing model with time separable preferences, presence of the two puzzles is estimated employing annual Czech data from 1995 to 2011. The equity premium puzzle is not present in the Czech Republic, as the coefficient of risk aversion 5.57 . On the other hand, the risk-free rate puzzle is as severe as in developed economies. Furthermore, the individual time preference parameter is estimated to be larger than one - a counterintuitive result suggesting consumers prefer unit of consumption tomorrow to unit of consumption today. Robustness of the results is confirmed when different proxy for a risk-free rate is used. Results do not change significantly and the risk-free rate puzzle persists. Direction for future research of the financial market puzzles in the Czech Republic is suggested.
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Kotek, Martin. "Rare Disasters and Asset Pricing Puzzles." Master's thesis, 2016. http://www.nusl.cz/ntk/nusl-347378.
Full textAbstract:
The impact of rare disasters on equity premium and term premium in a New Keynesian DSGE model is explored in the thesis. Andreasen's (2012) model with Epstein-Zin preferences, bonds and a rare disaster shock in total factor productivity process is extended by a variable capital stock and an equity-type asset. We find that the variable capital significantly changes behavior of the model, capital depreciation must be substantially increased to counter the effect of variable capital and stochastic mean of inflation increases. The model calibrated to the US economy and a high risk aversion generates 10-year term premium of 90 basis points, rare disasters increase the premium only by 3 basis points. The equity premium is 163 basis points and rare disasters increase it also only by 3 basis points. The model with a low coefficient of relative risk aversion of 5.5 generates negative risk premia. Rare disasters increase the risk premia by mere 4 basis points in comparison to a model with i.i.d. shocks. Powered by TCPDF (www.tcpdf.org)