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on Financial Markets |
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Issue of 2017‒07‒02
three papers chosen by |
| By: | Grammig, Joachim; Küchlin, Eva-Maria |
| Abstract: | The long-run consumption risk model provides a theoretically appealing explanation for prominent asset pricing puzzles, but its intricate structure presents a challenge for econometric analysis. This paper proposes a two-step indirect inference approach that disentangles the estimation of the model's macroeconomic dynamics and the investor's preference parameters. A Monte Carlo study explores the feasibility and efficiency of the estimation strategy. We apply the method to recent U.S. data and provide a critical re-assessment of the long-run risk model's ability to reconcile the real economy and financial markets. This two-step indirect inference approach is potentially useful for the econometric analysis of other prominent consumption-based asset pricing models that are equally difficult to estimate. |
| Keywords: | indirect inference estimation,asset pricing,longrun risk |
| JEL: | C58 G10 G12 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1701&r=fmk |
| By: | Rajkamal Iyer; Marco Macchiavelli |
| Abstract: | This is the first of two notes that empirically document the behavior of U.S. Primary Dealers during the 2007-08 financial crisis. In this note we show that dealers' exposure to risky assets drives the observed repo funding squeeze; moreover, as evident from Lehman's experience, we show that repos become subject to counterparty risk during periods of stress, even when collateralized by the safest assets. |
| Date: | 2017–06–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2017-06-22-1&r=fmk |
| By: | Jaydip Sen; Tamal Datta Chaudhuri |
| Abstract: | We propose a novel approach for analysis of the composition of an equity mutual fund based on the time series decomposition of the price movements of the individual stocks of the fund. The proposed scheme can be applied to check whether the style proclaimed for a mutual fund actually matches with the fund composition. We have applied our proposed framework on eight well known mutual funds of varying styles in the Indian financial market to check the consistency between their fund style and actual fund composition, and have obtained extensive results from our experiments. A detailed analysis of the results has shown that while in majority of the cases the actual allocations of funds are consistent with the corresponding fund styles, there have been some notable deviations too. |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1706.08361&r=fmk |