Central Bank Research Hub - JEL classification G12: Asset Pricing; Trading volume; Bond Interest Rates
http://www.bis.org/cbhub/list/jel_classification/jel_G12/index.rss
Latest research hub papers with the JEL classification:G12en30Jun/Market transparency and the marking precision of bond mutual fund managers
http://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Discussion_Paper_1/2014/2014_06_30_dkp_09.pdf
Deutsche Bundesbank Discussion Papers by Gjergji Cici, Scott Gibson, Yalin Gündüz, John J. Merrick, Jr.Market transparency and the marking precision of bond mutual fund managers2014-06-30T12:35:00ZMarket transparency and the marking precision of bond mutual fund managers2014-06-30T12:35:00ZFull texthttp://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Discussion_Paper_1/2014/2014_06_30_dkp_09.pdfYalin GündüzJohn J. MerrickGjergji CiciScott GibsonGjergji Cici, Scott Gibson, Yalin Gündüz, John J. Merrick, Jr.2014-06-30Deutsche Bundesbank Discussion PapersG12G2325Jun/Flights to Safety
http://www.federalreserve.gov/pubs/feds/2014/201446/201446pap.pdf
Board of Governors of the Federal Reserve System FEDS series by Lieven Baele, Geert Bekaert, Koen Inghelbrecht and Min WeiFlights to Safety2014-06-25T06:21:00ZUsing only daily data on bond and stock returns, we identify and characterize flight to safety (FTS) episodes for 23 countries. On average, FTS days comprise less than 3% of the sample, and bond returns exceed equity returns by 2.5 to 4%. The majority of FTS events are country-specific not global. FTS episodes coincide with increases in the VIX and the Ted spread, decreases in consumer sentiment indicators and appreciations of the Yen, Swiss franc, and US dollar. The financial, basic materials and industrial industries under-perform in FTS episodes, but the telecom industry outperforms. Money market instruments, corporate bonds, and commodity prices (with the exception of metals, including gold) face abnormal negative returns in FTS episodes. Hedge funds, especially those belonging to the "event-driven" styles, display negative FTS betas, after controlling for standard risk factors. Liquidity deteriorates on FTS days both in the bond and equity markets. Both economic growth and inflation decline right after and up to a year following a FTS spell.Flights to Safety2014-06-25T06:21:00ZAbstracthttp://www.federalreserve.gov/pubs/feds/2014/201446/201446abs.htmlFull texthttp://www.federalreserve.gov/pubs/feds/2014/201446/201446pap.pdfMin WeiLieven BaeleGeert BekaertKoen InghelbrechtLieven Baele, Geert Bekaert, Koen Inghelbrecht, Min Wei2014-06-24Board of Governors of the Federal Reserve System FEDS seriesE43E44G11G12G1424Jun/Understanding Mortgage Spreads
http://www.newyorkfed.org/research/staff_reports/sr674.pdf
New York Fed Staff reports by Nina Boyarchenko, Andreas Fuster and David O. LuccaUnderstanding Mortgage Spreads2014-06-24T12:35:59ZSpreads of agency mortgage-backed securities (MBS) vary significantly in the cross section and over time, but the sources of this variation are not well understood. We document that, in the cross section, MBS spreads adjusted for the prepayment option show a pronounced smile with respect to the MBS coupon. We propose prepayment model risk as a candidate driver of MBS spreads and present a new pricing model that uses "stripped" MBS prices to identify the contribution of this risk to option-adjusted spreads. With this pricing model, we find that prepayment model risk explains the smile, while the variation in the time series is mostly accounted for by a non-prepayment-risk component, which is related to credit risk in fixed- income markets and MBS supply. Finally, we study the MBS market response to the Fed's large-scale asset purchases and show that the model is consistent with spread movements following the initial announcement and, in particular, the fanning out of option-adjusted spreads across different coupons.Understanding Mortgage Spreads2014-06-24T12:35:59ZAbstracthttp://www.newyorkfed.org/research/staff_reports/sr674.htmlFull texthttp://www.newyorkfed.org/research/staff_reports/sr674.pdfAndreas FusterDavid O. LuccaNina BoyarchenkoNina Boyarchenko, Andreas Fuster, David O. Lucca2014-06New York Fed Staff reportsG10G12G1316Jun/Identification of Asset Price Misalignments on Financial Markets with Extreme Value Theory
http://www.cnb.cz/miranda2/export/sites/www.cnb.cz/en/research/research_publications/cnb_wp/download/cnbwp_2013_14.pdf
Czech National Bank Working papers by Narcisa Kadláková, Lubo Komárek, Zlatue Komárková and Michal HlaváekIdentification of Asset Price Misalignments on Financial Markets with Extreme Value Theory2014-06-16T12:31:59ZThis paper examines the potential for concurrence of crises in the foreign exchange, stock, and government bond markets as well as identifying asset price misalignments from equilibrium for three Central European countries and the euro area. Concurrence is understood as the joint occurrence of extreme asset changes in different countries and is assessed with a measure of the asymptotic tail dependence among the distributions studied. However, the main aim of the paper is to examine the potential for concurrence of misalignments from equilibrium among financial markets. To this end, representative assets are linked to their fundamentals using a cointegration approach. Next, the extreme values of the differences between the actual daily exchange rates and their monthly equilibrium values determine the episodes associated with large departures from equilibrium. Using tools from Extreme Value Theory, we analyze the transmission of both standard crisis and misalignment-from-equilibrium formation events in the foreign exchange, stock, and government bond markets examined. The results reveal significant potential for co-alignment of extreme events in these markets in Central Europe. The evidence for co-movements is found to be very weak for the exchange rates, but is stronger for the stock markets and bond markets in some periods.Identification of Asset Price Misalignments on Financial Markets with Extreme Value Theory2014-06-16T12:31:59ZAbstracthttp://www.cnb.cz/en/research/research_publications/cnb_wp/2013/cnbwp_2013_14.htmlFull texthttp://www.cnb.cz/miranda2/export/sites/www.cnb.cz/en/research/research_publications/cnb_wp/download/cnbwp_2013_14.pdfMichal HlaváekZlatue KomárkováNarcisa KadlákováLubo KomárekNarcisa Kadláková, Lubo Komárek, Zlatue Komárková, Michal Hlaváek2013-12Czech National Bank Working papersC38C58E44G1211Jun/Exchange rates, expected returns and risk
http://www.rbnz.govt.nz/research_and_publications/discussion_papers/2014/dp14_01.pdf
Reserve Bank of New Zealand Discussion Papers by Anella MunroExchange rates, expected returns and risk2014-06-11T17:32:59ZAccording to theory, higher expected foreign risk-free returns and foreign currency risk both increase foreign yields, but have opposing effects on the value of the foreign currency. This paper exploits that relationship to jointly identify the unobserved risk-free return and risk premium components of exchange rates and expected relative returns. When risk and return are jointly modelled over a 10-year horizon, UIP cannot be rejected for any of the eight advanced country USD currency pairs examined. Innovations in the currency premium are correlated with 'speculative' positioning in foreign exchange markets, and for non-reserve currencies, with 'VIX' risk aversion. Innovations in the risk-free component are correlated with changes in nominal short-term interest rates. Both expected returns and risk play important roles in exchange rate dynamics.Exchange rates, expected returns and risk2014-06-11T17:32:59ZFull texthttp://www.rbnz.govt.nz/research_and_publications/discussion_papers/2014/dp14_01.pdfAnella MunroMunro, Anella2014-06Reserve Bank of New Zealand Discussion PapersF31G1211Jun/Interventions and Expected Exchange Rates in Emerging Market Economies
http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{A24E41FE-2BBA-C659-A8EF-717082FFB19D}.pdf
Bank of Mexico Working Papers by Santiago García-Verdú and Manuel Ramos-FranciaInterventions and Expected Exchange Rates in Emerging Market Economies2014-06-11T06:17:59ZWe study variations in the risk-neutral distributions of the exchange rates in Brazil, Chile, Colombia, Mexico, and Peru due to interventions implemented by these countries. For this purpose, we first estimate the risk-neutral densities of the exchange rates based on derivatives market data, for one-day and one-week horizons. Second, using a linear regression model, we assess possible effects on the distributions of the expected exchange rates due to these interventions. We find little evidence of an effect on the expected exchange rates' means, volatilities, skewness, kurtoses, risk premia, and tails' parameters. In the few cases for which we do find some statistical evidence of an effect, it tends to be short-lived or not economically significant. On the other hand, we find evidence that interventions which objective is to restore and/or assure the proper functioning of exchange rate markets have a higher probability of success. This probability increases as the amount of resources to intervene at the disposal of the central bank increases. Needless to say, there are limits to the methodology we use.Interventions and Expected Exchange Rates in Emerging Market Economies2014-06-11T06:17:59ZFull texthttp://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{A24E41FE-2BBA-C659-A8EF-717082FFB19D}.pdfSantiago García VerdúManuel Ramos FranciaSantiago García-Verdú, Manuel Ramos-Francia2014-06Bank of Mexico Working PapersC58E5F31G1202Jun/Short-sale constraints and financial stability: evidence from the Spanish market
http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/14/Fich/dt1410e.pdf
Bank of Spain Working Papers by Óscar Arce and Sergio MayordomoShort-sale constraints and financial stability: evidence from the Spanish market2014-06-02T12:31:59ZShort-sale constraints and financial stability: evidence from the Spanish market2014-06-02T12:31:59ZFull texthttp://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/14/Fich/dt1410e.pdfSergio MayordomoOscar J. ArceÓscar Arce and Sergio Mayordomo2014-06Bank of Spain Working PapersG01G12G14G1831May/Peso-Dollar Forward Market Analysis: Explaining Arbitrage Opportunities during the Financial Crisis
http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{EA2BC03E-F8C3-23C6-3A2E-7B5E9C9EB09E}.pdf
Bank of Mexico Working Papers by Juan R. Hern andezPeso-Dollar Forward Market Analysis: Explaining Arbitrage Opportunities during the Financial Crisis2014-05-31T06:19:59ZUsing a vector error correction model I test whether shocks in the funding liquidity conditions in the U.S. and Europe separately explain deviations from the covered interest parity (CIP) between the U.S. Dollar and the Mexican Peso. I find that: (1) Apparent deviations from the CIP seem to be persistent, unless a closer measure to the true costs of funding for the agents is considered. (2) A stable long-run equilibrium relation emerges when I include the effects of funding liquidity shocks stemming from the U.S. and Europe. (3) The exchange rate forward premium adjusts towards a long-run equilibrium relation given by the CIP. (4) Surprisingly, the yield on 1-month Mexican CETEs has its own stochastic trend despite the strong relation between the U.S. and Mexico's economies. (5) Analysis confirms that both future and spot exchange rates are affected by shocks stemming from the U.S. Treasury Bills, the funding liquidity in the U.S. and Europe, and the Mexican CETEs.Peso-Dollar Forward Market Analysis: Explaining Arbitrage Opportunities during the Financial Crisis2014-05-31T06:19:59ZFull texthttp://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{EA2BC03E-F8C3-23C6-3A2E-7B5E9C9EB09E}.pdfJuan R. HernándezJuan R. Hern andez2014-05Bank of Mexico Working PapersC58F31G12G13G1424May/Very Long-Run Discount Rates
http://www.dallasfed.org/assets/documents/institute/wpapers/2014/0182.pdf
Dallas Fed Institute Working Papers by Stefano Giglio, Matteo Maggiori and Johannes StroebelVery Long-Run Discount Rates2014-05-24T06:19:00ZWe provide direct estimates of how agents trade off immediate costs and uncertain future benefits that occur in the very long run, 100 or more years away. We exploit a unique feature of housing markets in the U.K. and Singapore, where residential property ownership takes the form of either leaseholds or freeholds. Leaseholds are temporary, pre-paid, and tradable ownership contracts with maturities between 99 and 999 years, while freeholds are perpetual ownership contracts. The difference between leasehold and freehold prices reflects the present value of perpetual rental income starting at leasehold expiry, and is thus informative about very long-run discount rates. We estimate the price discounts for varying leasehold maturities compared to freeholds and extremely long-run leaseholds via hedonic regressions using proprietary datasets of the universe of transactions in each country. Agents discount very long-run cash flows at low rates, assigning high present values to cash flows hundreds of years in the future. For example, 100-year leaseholds are valued at more than 10% less than otherwise identical freeholds, implying discount rates below 2.6% for 100-year claims. Given the riskiness of rents, this suggests that both long-run riskfree discount rates and long-run risk premia are low. We show how the estimated very long-run discount rates are informative for climate change policy.Very Long-Run Discount Rates2014-05-24T06:19:00ZFull texthttp://www.dallasfed.org/assets/documents/institute/wpapers/2014/0182.pdfJohannes StroebelStefano GiglioMatteo MaggioriStefano Giglio, Matteo Maggiori and Johannes Stroebel2013-05Dallas Fed Institute Working PapersG11G12R3022May/Uncovered Equity Parity and Rebalancing in International Portfolios
http://www.federalreserve.gov/pubs/ifdp/2014/1103/ifdp1103.pdf
Board of Governors of the Federal Reserve System International Financial Discussion Papers by Stephanie E. Curcuru, Charles P. Thomas, Francis E. Warnock, and Jon WongswanUncovered Equity Parity and Rebalancing in International Portfolios2014-05-22T06:17:59ZPortfolio rebalancing is a key driver of the Uncovered Equity Parity (UEP) condition. According to UEP, when foreign equity holdings outperform domestic holdings, domestic investors are exposed to higher exchange rate exposure and hence repatriate some of the foreign equity to decrease their exchange rate risk. By doing so, foreign currency is sold, leading to foreign currency depreciation. We examine the relationship between U.S. investors' portfolio reallocations and returns and find some evidence consistent with UEP: Portfolio shifts are related to past returns in the underlying equity markets. But we argue that a motive other than reducing currency risk exposure is likely behind this rebalancing. In particular, U.S. investors may be exploiting mean reversion in underlying equity markets, rebalancing away from equity markets that recently performed well and moving into equity markets market just prior to relatively strong performance. Such behavior suggests tactical reallocations to increase returns rather than reduce risk.Uncovered Equity Parity and Rebalancing in International Portfolios2014-05-22T06:17:59ZAbstracthttp://www.federalreserve.gov/pubs/ifdp/2014/1103/default.htmFull texthttp://www.federalreserve.gov/pubs/ifdp/2014/1103/ifdp1103.pdfJon WongswanCharles P. ThomasFrancis E. WarnockStephanie E. CurcuruStephanie E. Curcuru, Charles P. Thomas, Francis E. Warnock, and Jon Wongswan2014-05-21Board of Governors of the Federal Reserve System International Financial Discussion PapersF21G11G1219May/Home Price Beliefs in Australia
http://www.rba.gov.au/publications/rdp/2014/pdf/rdp2014-04.pdf
Reserve Bank of Australia Research Discussion Papers by Callan Windsor, Gianni La Cava and James HansenHome Price Beliefs in Australia2014-05-19T12:31:59ZWe document some new stylised facts about how Australian homeowners value their homes using household panel data and unit-record data on home sale prices. We find that homeowners' price beliefs are unbiased at the postcode level, on average, although there is considerable dispersion in the difference between beliefs and prices across postcodes. Household characteristics, such as age and tenure, and the regional unemployment rate are correlated with differences between beliefs and prices. We also find evidence that the difference between beliefs and prices has explanatory power for average household consumption, leverage and portfolio decisions after controlling for the market-inferred value of the home. These facts provide empirical evidence to support recent literature on the importance of belief formation for household decision-making.Home Price Beliefs in Australia2014-05-19T12:31:59ZFull texthttp://www.rba.gov.au/publications/rdp/2014/pdf/rdp2014-04.pdfJames HansenGianni La CavaCallan WindsorCallan Windsor2014-05Reserve Bank of Australia Research Discussion PapersC33D8E21G11G1214May/The VIX, the variance premium and stock market volatility
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1675.pdf
European Central Bank Working papers by Geert Bekaert, Marie HoerovaThe VIX, the variance premium and stock market volatility2014-05-14T12:31:59ZWe decompose the squared VIX index, derived from US S&P500; options prices, into the conditional variance of stock returns and the equity variance premium. We evaluate a plethora of state-of-the-art volatility forecasting models to produce an accurate measure of the conditional variance. We then examine the predictive power of the VIX and its two components for stock market returns, economic activity and financial instability. The variance premium predicts stock returns while the conditional stock market variance predicts economic activity and has a relatively higher predictive power for financial instability than does the variance premium.The VIX, the variance premium and stock market volatility2014-05-14T12:31:59ZECBFull texthttp://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1675.pdfMarie HoerovaGeert BekaertGeert Bekaert, Marie Hoerova2014-05-14European Central Bank Working papersC22C52E32G1228Apr/Economic surprises and inflation expectations: Has anchoring of expectations survived the crisis?
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1671.pdf
European Central Bank Working papers by S Lejsgaard Autrup, Magdalena GrotheEconomic surprises and inflation expectations: Has anchoring of expectations survived the crisis?2014-04-28T12:33:00ZThis paper analyses price formation in medium- to longer-term maturity segments of euro area and US inflation-linked and nominal bond markets around the releases of important economic indicators. We compare the pre-crisis and crisis periods, controlling for liquidity effects observed in financial markets. The results allow us to draw conclusions about the anchoring of inflation expectations in the two currency areas before and during the crisis. We find a somewhat stronger anchoring of inflation expectations in the euro area than in the United States. During the crisis, the degree of anchoring of inflation expectations did not change in the euro area, but it decreased to some extent in the United States.Economic surprises and inflation expectations: Has anchoring of expectations survived the crisis?2014-04-28T12:33:00ZECBFull texthttp://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1671.pdfMagdalena GrotheS Lejsgaard AutrupS Lejsgaard Autrup, Magdalena Grothe2014-04-28European Central Bank Working papersE44G01G1203Apr/Tips from TIPS: the informational content of Treasury Inflation-Protected Security prices
http://www.federalreserve.gov/pubs/feds/2014/201424/201424pap.pdf
Board of Governors of the Federal Reserve System FEDS series by Stefania D'Amico, Don H. Kim, and Min WeiTips from TIPS: the informational content of Treasury Inflation-Protected Security prices2014-04-03T06:19:59ZTIPS are notes and bonds issued by the U.S. Treasury with coupons and principal payments indexed to inflation. Using no-arbitrage term structure models, we show that TIPS yields contained liquidity premiums as large as 100 basis points when TIPS were first issued, reflecting the newness of the instrument, and up to 350 basis points during the recent financial crisis, reflecting common funding constraints affecting a variety of financial markets. Applying our models to the U.K. data also reveals liquidity premiums in index-linked gilt yields that spiked to nearly 250 basis points at the height of the crisis. Ignoring TIPS liquidity premiums is shown to significantly distort the information content of TIPS yields and TIPS breakeven inflation rate, two widely-used empirical proxies for real rates and expected inflation.Tips from TIPS: the informational content of Treasury Inflation-Protected Security prices2014-04-03T06:19:59ZAbstracthttp://www.federalreserve.gov/pubs/feds/2014/201424/201424abs.htmlFull texthttp://www.federalreserve.gov/pubs/feds/2014/201424/201424pap.pdfStefania D'AmicoDon H. KimMin WeiStefania D'Amico, Don H. Kim, and Min Wei2014-04-02Board of Governors of the Federal Reserve System FEDS seriesE43E44G01G1228Mar/Expectations, risk premia and information spanning in dynamic term structure model estimation
http://www.bankofengland.co.uk/research/Pages/workingpapers/2014/wp489.aspx
Bank of England Working papers by Rodrigo GuimarãesExpectations, risk premia and information spanning in dynamic term structure model estimation2014-03-28T17:32:59ZExpectations, risk premia and information spanning in dynamic term structure model estimation2014-03-28T17:32:59ZAbstracthttp://www.bankofengland.co.uk/research/Pages/workingpapers/2014/wp489.aspxRodrigo GuimarãesRodrigo Guimarães2014-03-28Bank of England Working papersC58E43G1228Feb/Real Term Structure and Inflation Compensation in the Euro Area
http://www.ijcb.org/journal/ijcb14q1a1.pdf
IJCB International Journal of Central Banking by Marcello PericoliReal Term Structure and Inflation Compensation in the Euro Area2014-02-28T17:34:59ZThis paper estimates the term structure of zero-coupon real interest rates for the euro area implied by French indexlinked bonds with a smoothing spline methodology, which is very effective in capturing the general shape of the real term structure, while smoothing through idiosyncratic variations in the yields. A comparison shows that the chosen spline outperforms other methodologies commonly used in the literature across several dimensions. The paper also estimates a liquidity-adjusted nominal term structure to compute the constant-maturity inflation compensation. This compensation is compared with the surveyed inflation expectation in order to obtain a measure of the inflation risk premium in the euro area during the last decade.Real Term Structure and Inflation Compensation in the Euro Area2014-02-28T17:34:59ZAbstracthttp://www.ijcb.org/journal/ijcb14q1a1.htmFull texthttp://www.ijcb.org//www.ijcb.org/journal/ijcb14q1a1.pdfMarcello PericoliMarcello Pericoli2014-03IJCB International Journal of Central BankingC02G1G1224Feb/Investor fears and risk premia for rare events
http://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Discussion_Paper_1/2014/2014_02_24_dkp_03.pdf?__blob=publicationFile
Deutsche Bundesbank Discussion Papers by Claudia SchwarzInvestor fears and risk premia for rare events2014-02-24T12:33:00ZThis paper uses the method developed by Bollerslev and Todorov (2011b) to estimate risk premia for extreme events for the US and the German stock markets. The method extracts jump tail measures from high-frequency futures price data and from options data. In a second step, jump tail distributions are approximated using the extreme value theory. Applying the method to German data yields very similar results to the ones shown for the US data. The risk premia for rare events constitute a considerable part of the total equity and variance risk premia for both markets. When using the results to build an investor fear index for the US and Germany, I find that the correlation of the fear index for the US with the VIX is 89.5% and that of the fear index for Germany with the VDAX is 90.6%.Investor fears and risk premia for rare events2014-02-24T12:33:00ZFull texthttp://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Discussion_Paper_1/2014/2014_02_24_dkp_03.pdf?__blob=publicationFileClaudia SchwarzClaudia Schwarz2014-02-24Deutsche Bundesbank Discussion PapersC13G10G1212Dec/Welfare and bond pricing implications of fiscal stabilization policies
http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/BoF_DP_1332.pdf
Bank of Finland Discussion Papers by Kai Christoffel - Ivan Jaccard - Juha KilponenWelfare and bond pricing implications of fiscal stabilization policies2013-12-12T06:17:59ZHow do cyclical fiscal stabilisation policies affect welfare and government bond risk premia? Using a new Keynesian model we find that the effects of fiscal policy rules on the bond premium and welfare crucially depend on the source of business cycle fluctuations. The overall effect is estimated using Bayesian methods and the mechanism is deconstructed by examining the propagation mechanism of the different shocks. We find that the impact of fiscal policy cyclicality on welfare and risk premia is highly non-linear and that these effects are of a policy relevant magnitude. Finally, we find that the welfare cost of highly procyclical fiscal policies are very large, but also excessive fiscal stabilization can generate non-negligible welfare losses.Welfare and bond pricing implications of fiscal stabilization policies2013-12-12T06:17:59ZAbstracthttp://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Pages/dp2013_32.aspxFull texthttp://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/BoF_DP_1332.pdfKai ChristoffelJuha KilponenIvan JaccardKai Christoffel - Ivan Jaccard - Juha Kilponen2013-12-11Bank of Finland Discussion PapersE32E52E62G1228Sep/A Staggered Pricing Approach to Modeling Speculative Storage: Implications for Commodity Price Dynamics
http://www.frbatlanta.org/documents/pubs/wp/wp1308.pdf
Atlanta Fed Working papers by Hirbod Assa, Amal Dabbous, and Nikolay GospodinovA Staggered Pricing Approach to Modeling Speculative Storage: Implications for Commodity Price Dynamics2013-09-28T06:41:59ZThis paper embeds a staggered price feature into the standard speculative storage model of Deaton and Laroque (1996). Intermediate goods inventory speculators are added as an additional source of intertemporal linkage, which helps us to replicate the stylized facts of the observed commodity price dynamics. Incorporating this type of friction into the model is motivated by its ability to increase price stickiness which, gives rise to a higher degree of persistence in the first two conditional moments of commodity prices. The structural parameters of our model are estimated by the simulated method of moments using actual prices for four agricultural commodities. Simulated data are then employed to assess the effects of our staggered price approach on the time series properties of commodity prices. Our results lend empirical support to the possibility of staggered prices.A Staggered Pricing Approach to Modeling Speculative Storage: Implications for Commodity Price Dynamics2013-09-28T06:41:59ZAbstracthttp://www.frbatlanta.org//pubs/wp/13_08.cfmFull texthttp://www.frbatlanta.org/documents/pubs/wp/wp1308.pdfHirbod AssaAmal DabbousNikolay GospodinovHirbod Assa, Amal Dabbous, and Nikolay Gospodinov2013-09-20Atlanta Fed Working papersC15E21G12O13Q1127Sep/Price effects of sovereign debt auctions in the Euro-zone: the role of the crisis
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1595.pdf
European Central Bank Working papers by Roel Beetsma, Massimo Giuliodori, Frank de Jong, Daniel WidijantoPrice effects of sovereign debt auctions in the Euro-zone: the role of the crisis2013-09-27T12:35:00ZExploring the period since the inception of the euro, we show that secondary-market yields on Italian public debt increase in anticipation of auctions of new issues and decrease after the auction, while no or a smaller such effect is present for German public debt. However, these yield movements on the Italian debt are largely confined to the period of the crisis since mid-2007. We also find that there is some tendency of the yield movements to be larger when the demand for the new issue is smaller relative to its supply. Our results are consistent with a framework in which a small group of primary dealers require compensation for inventory risk and this compensation needs to be higher when market uncertainty is larger. We also find that the secondary-market behaviour of series with a maturity close to the auctioned series, but for which there is no auction, is very similar to the secondary-market behaviour of the auctioned series. These findings support an explanation of yield movements based on the behaviour of primary dealers with limited risk-bearing capacity.Price effects of sovereign debt auctions in the Euro-zone: the role of the crisis2013-09-27T12:35:00ZECBFull texthttp://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1595.pdfRoel BeetsmaDaniel WidijantoMassimo GiuliodoriFrank de JongRoel Beetsma, Massimo Giuliodori, Frank de Jong, Daniel Widijanto2013-09-27European Central Bank Working papersG12G1824Apr/Jump-Diffusion Long-Run Risks Models, Variance Risk Premium and Volatility Dynamics
http://www.bankofcanada.ca/wp-content/uploads/2013/04/wp2013-12.pdf
Bank of Canada Working papers by Jianjian JinJump-Diffusion Long-Run Risks Models, Variance Risk Premium and Volatility Dynamics2013-04-24T06:19:00ZThis paper calibrates a class of jump-diffusion long-run risks (LRR) models to quantify how well they can jointly explain the equity risk premium and the variance risk premium in the U.S. financial markets, and whether they can generate realistic dynamics of risk-neutral and realized volatilities. I provide evidence that the jump risk in volatility of long run consumption growth is a key component of the equity risk premium and the variance risk premium in financial markets. Moreover, I find that matching the VIX dynamics during the calibration process is crucial when comparing different jump channels. Specifically, a jump-in-growth LRR model generates a good fit of the average variance risk premium, but a poor fit of the dynamics of the VIX or realized stock volatility. In contrast, a jump-in-volatility LRR model generates a smaller variance risk premium but better fits the VIX and the realized stock volatility dynamics. Finally, jump-in-volatility models generate predictability of returns by the variance risk premium that is more consistent with the data.Jump-Diffusion Long-Run Risks Models, Variance Risk Premium and Volatility Dynamics2013-04-24T06:19:00ZAbstracthttp://www.bankofcanada.ca/2013/04/research/working-paper-2013-12/Full texthttp://www.bankofcanada.ca/wp-content/uploads/2013/04/wp2013-12.pdfJianjian JinJianjian Jin2013-04Bank of Canada Working papersG12G1723Apr/A New Linear Estimator for Gaussian Dynamic Term Structure Models
http://www.bankofcanada.ca/wp-content/uploads/2013/04/wp2013-10.pdf
Bank of Canada Working papers by Antonio Diez de los RiosA New Linear Estimator for Gaussian Dynamic Term Structure Models2013-04-23T06:19:00ZThis paper proposes a novel regression-based approach to the estimation of Gaussian dynamic term structure models that avoids numerical optimization. This new estimator is an asymptotic least squares estimator defined by the no-arbitrage conditions upon which these models are built. We discuss some efficiency considerations of this estimator, and show that it is asymptotically equivalent to maximum likelihood estimation. Further, we note that our estimator remains easy-to-compute and asymptotically efficient in a variety of situations in which other recently proposed approaches lose their tractability. We provide an empirical application in the context of the Canadian bond market.A New Linear Estimator for Gaussian Dynamic Term Structure Models2013-04-23T06:19:00ZAbstracthttp://www.bankofcanada.ca/2013/04/research/working-paper-2013-10/Full texthttp://www.bankofcanada.ca/wp-content/uploads/2013/04/wp2013-10.pdfAntonio Diez de los RiosAntonio Diez de los Rios2013-04Bank of Canada Working papersC13E43G1208Nov/Analytical Solution for the Constrained Hansen-Jagannathan Distance under Multivariate Ellipticity
http://www.frbatlanta.org/documents/pubs/wp/wp1218.pdf
Atlanta Fed Working papers by Nikolay Gospodinov, Raymond Kan, and Cesare RobottiAnalytical Solution for the Constrained Hansen-Jagannathan Distance under Multivariate Ellipticity2012-11-08T06:23:59ZWe provide an in-depth analysis of the theoretical properties of the Hansen-Jagannathan (HJ) distance that incorporates a no-arbitrage constraint. Under a multivariate elliptical distribution assumption, we present explicit expressions for the HJ-distance with a no-arbitrage constraint, the associated Lagrange multipliers, and the SDF parameters in the case of linear SDFs. This approach allows us to analyze the benefits and costs of using the HJ-distance with a no-arbitrage constraint to rank asset pricing models.Analytical Solution for the Constrained Hansen-Jagannathan Distance under Multivariate Ellipticity2012-11-08T06:23:59ZAbstracthttp://www.frbatlanta.org//pubs/wp/12_18.cfmFull texthttp://www.frbatlanta.org/documents/pubs/wp/wp1218.pdfNikolay GospodinovCesare RobottiRaymond KanNikolay Gospodinov, Raymond Kan, and Cesare Robotti2012-11-06Atlanta Fed Working papersG1208Nov/Robust Inference in Linear Asset Pricing Models
http://www.frbatlanta.org/documents/pubs/wp/wp1217.pdf
Atlanta Fed Working papers by Nikolay Gospodinov, Raymond Kan, and Cesare RobottiRobust Inference in Linear Asset Pricing Models2012-11-08T06:23:59ZWe derive new results on the asymptotic behavior of the estimated parameters of a linear asset pricing model and their associated t-statistics in the presence of a factor that is independent of the returns. The inclusion of this "useless" factor in the model leads to a violation of the full rank (identification) condition and renders the inference nonstandard. We show that the estimated parameter associated with the useless factor diverges with the sample size but the misspecification-robust t-statistic is still well-behaved and has a standard normal limiting distribution. The asymptotic distributions of the estimates of the remaining parameters and the model specification test are also affected by the presence of a useless factor and are nonstandard. We propose a robust and easy-to-implement model selection procedure that restores the standard inference on the parameters of interest by identifying and removing the factors that do not contribute to improved pricing. The finite-sample properties of our asymptotic approximations and the practical relevance of our results are illustrated using simulations and an empirical application.Robust Inference in Linear Asset Pricing Models2012-11-08T06:23:59ZAbstracthttp://www.frbatlanta.org//pubs/wp/12_17.cfmFull texthttp://www.frbatlanta.org/documents/pubs/wp/wp1217.pdfNikolay GospodinovCesare RobottiRaymond KanNikolay Gospodinov, Raymond Kan, and Cesare Robotti2012-11-06Atlanta Fed Working papersC13C32G1227Aug/House Prices, Credit Growth, and Excess Volatility: Implications for Monetary and Macroprudential Policy
http://www.frbsf.org/publications/economics/papers/2012/wp12-11bk.pdf
San Francisco Fed Working Papers by Paolo Gelain, Kevin J. Lansing, Caterina MendicinoHouse Prices, Credit Growth, and Excess Volatility: Implications for Monetary and Macroprudential Policy2012-08-27T18:25:59ZDeciding whether policy should respond directly to financial variables requires a realistic economic model that captures the links between asset prices, credit expansion, and real economic activity. We show that introducing simple moving-average forecast rules for a subset of households can significantly magnify the volatility and persistence of house prices and household debt relative to otherwise similar models with fully rational expectations.House Prices, Credit Growth, and Excess Volatility: Implications for Monetary and Macroprudential Policy2012-08-27T18:25:59ZFull texthttp://www.frbsf.org/publications/economics/papers/2012/wp12-11bk.pdfKevin J. LansingCaterina MendicinoPaolo GelainPaolo Gelain, Kevin J. Lansing, Caterina Mendicino2012-08-17San Francisco Fed Working PapersE32E44G12O40