The main objective in this project is to take a look at the rejection of the expectations hypothesis within a New Keynesian business cycle model. Earlier studies suggest that the Lucas general equilibrium asset pricing model cannot take into account sign nor magnitude of average risk premia in forward prices, and is helpless to clarify rejection of the expectations hypothesis.
Levy processes have attained good results in pricing single asset options. Within this dissertation, we present a technique allowing us to extend the single asset pricing approach based upon Levy processes to multiasset cases. In our approach, we suppose the log-return of
A well-known study, much like ours, was made in 1985 in the united states, demonstrating that “loser” portfolios outperformed the market while “winner” portfolios generated less return than the market. This finding isn’t according to the theory of efficient markets. If a
This paper develops and implements an exact finite-sample test of asset pricing models with time varying risk premia using posterior probabilities. The strength of our approach is that it allows multiple conditional asset pricing specifications, both nested and non-nested, to be tested
This study analyses cross-country correlations of stock prices (values of firms) using the basic New Open Economy Macroeconomics model. We show that cross-country correlations of stock prices greatly depend on the currency of export pricing in the case of monetary shocks but
Momentum profitability concentrates in high information uncertainty and high credit risk firms and is virtually nonexistent otherwise. This paper rationalizes such momentum interactions in equilibrium asset pricing. In our paradigm, dividend growth is mean reverting, expected dividend growth is stochastic and highly
This paper develops and implements an exact finite-sample test of asset pricing models with time varying risk premia using posterior probabilities. The strength of our approach is that it allows multiple conditional asset pricing specifications, both nested and non-nested, to be tested