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on Financial Markets |
| By: | Dewachter, Hans; Iania, Leonardo |
| Abstract: | This paper extends the benchmark Macro-Finance model by introducing, next to the standard macroeconomic factors, additional liquidity-related and return forecasting factors. Liquidity factors are obtained from a decomposition of the TED spread while the return-forecasting (risk premium) factor is extracted by imposing a single factor structure on excess holding returns. The model is estimated on US data using MCMC techniques. Two findings stand out. First, the model outperforms Macro-Finance benchmark models in fitting the yield curve. Second, financial shocks, either in the form of liquidity or risk premium shocks, have a statistically and economically significant impact on the yield curve. |
| Keywords: | Term structure, Macro-finance, TED spread, Interbank lending rates |
| JEL: | E43 G12 E44 C11 |
| Date: | 2009–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18840&r=fmk |
| By: | Albuquerque, Rui |
| Abstract: | This paper analyzes the asset pricing implications of periodic cash payouts within the context of a stationary rational expectations model with heterogeneous investors. The periodicity of cash payouts provides a natural motivation for time-varying conditional volatility in stock returns. I show that the unconditional distribution of returns is a mixture of normals distribution, which has non-trivial skewness properties. I examine how conditional volatility, trading volume and skewness in stock returns are related to information dispersion and liquidity in the stock market. The model provides a rationale for why firm returns have positive skewness while market returns have negative skewness. |
| Keywords: | investor heterogeneity; periodic cash payouts; Skewness; turnover |
| JEL: | G12 G14 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7573&r=fmk |