Long Memory And The Term Structure Of Risk
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Author | : Peter C. Schotman |
Publisher | : |
Total Pages | : 44 |
Release | : 2009 |
Genre | : |
ISBN | : |
This paper explores the implications of asset return predictability for long-term portfolio choice when return-forecasting variables are fractionally integrated. For important predictor variables, like the dividend-price ratio, and nominal and real interest rates, we estimate orders of integration around 0.8. This leads to substantial increases of the estimated long-term risk of stocks, bonds, and cash compared to estimates obtained from a stationary VAR. Results are sensitive to the inclusion of the short-term nominal interest rate in the prediction equation of excess stock returns. Jointly with the dividend-price ratio it has significant predictive power, but contrary to the dividend-price ratio the nominal interest rate does not induce mitigating effects through mean reversion.
Author | : Nerija Banaitiene |
Publisher | : BoD – Books on Demand |
Total Pages | : 600 |
Release | : 2012-09-12 |
Genre | : Business & Economics |
ISBN | : 953510747X |
Every business and decision involves a certain amount of risk. Risk might cause a loss to a company. This does not mean, however, that businesses cannot take risks. As disengagement and risk aversion may result in missed business opportunities, which will lead to slower growth and reduced prosperity of a company. In today's increasingly complex and diverse environment, it is crucial to find the right balance between risk aversion and risk taking. To do this it is essential to understand the complex, out of the whole range of economic, technical, operational, environmental and social risks associated with the company's activities. However, risk management is about much more than merely avoiding or successfully deriving benefit from opportunities. Risk management is the identification, assessment, and prioritization of risks. Lastly, risk management helps a company to handle the risks associated with a rapidly changing business environment.
Author | : Cornelis Los |
Publisher | : Routledge |
Total Pages | : 513 |
Release | : 2003-07-24 |
Genre | : Business & Economics |
ISBN | : 1134469314 |
This new book uses advanced signal processing technology to measure and analyze risk phenomena of the financial markets. It explains how to scientifically measure, analyze and manage non-stationarity and long-term time dependence (long memory) of financial market returns. It studies, in particular, financial crises in persistent financial markets,
Author | : Gary S. Shea |
Publisher | : |
Total Pages | : 52 |
Release | : 1985 |
Genre | : Interest rates |
ISBN | : |
Author | : Amia Santini |
Publisher | : Springer Nature |
Total Pages | : 82 |
Release | : 2022-05-03 |
Genre | : Business & Economics |
ISBN | : 3658374500 |
The phenomenon of excess volatility in the context of share prices and of the term structure of interest rates has been documented by the existing literature, highlighting the limitations of traditional models of rational expectations and of reliance on the efficient market hypothesis. The data violates the bounds on volatility that are derived from them. Amia Santini studies the possible shortcomings of the methodologies used to uncover those inconsistencies, and the potential explanations of the observed phenomenon that can be considered in line with the rational expectation framework. She focuses on a relatively newer field of study: derivative instruments. Previous results of excess volatility, recovered with a worldwide focus, are presented and an empirical analysis is performed to assess whether a similar outcome would be obtained in the Eurozone market. The exploration of financial information that falls underneath the risk-neutral measure, such as derivative prices, reduces the importance of time-varying discount rates as a potential explanation of excess volatility. In fact, the martingale measure already incorporates all potential variation in risk premia, which is the main driver of changes in discount rates. This opens the door to different and innovative prospects, and specific attention is paid to a new model for investor behaviour, that of natural expectations.
Author | : Mariano M. Croce |
Publisher | : |
Total Pages | : 0 |
Release | : 2007 |
Genre | : |
ISBN | : |
We study the role of information in asset pricing models with long-run cash flow risk. When investors can distinguish short- from long-run consumption risks (full information), the model generates a sizable equity risk premium only if the equity term structure slopes up, contrary to the data. In general, the short- and long-run components are unidentified. We propose a sparsity-based bounded rationality model of long-run risk that is both parsimonious and fully identified from historical data. In contrast to full information, the model generates a sizable market risk premium simultaneously with a downward sloping equity term structure, as in the data.
Author | : Jan Beran |
Publisher | : Routledge |
Total Pages | : 336 |
Release | : 2017-11-22 |
Genre | : Mathematics |
ISBN | : 1351414100 |
Statistical Methods for Long Term Memory Processes covers the diverse statistical methods and applications for data with long-range dependence. Presenting material that previously appeared only in journals, the author provides a concise and effective overview of probabilistic foundations, statistical methods, and applications. The material emphasizes basic principles and practical applications and provides an integrated perspective of both theory and practice. This book explores data sets from a wide range of disciplines, such as hydrology, climatology, telecommunications engineering, and high-precision physical measurement. The data sets are conveniently compiled in the index, and this allows readers to view statistical approaches in a practical context. Statistical Methods for Long Term Memory Processes also supplies S-PLUS programs for the major methods discussed. This feature allows the practitioner to apply long memory processes in daily data analysis. For newcomers to the area, the first three chapters provide the basic knowledge necessary for understanding the remainder of the material. To promote selective reading, the author presents the chapters independently. Combining essential methodologies with real-life applications, this outstanding volume is and indispensable reference for statisticians and scientists who analyze data with long-range dependence.
Author | : Nazibrola Lordkipanidze |
Publisher | : |
Total Pages | : 296 |
Release | : 2004 |
Genre | : |
ISBN | : |
Author | : Terence C. Mills |
Publisher | : Springer |
Total Pages | : 1406 |
Release | : 2009-06-25 |
Genre | : Business & Economics |
ISBN | : 0230244408 |
Following theseminal Palgrave Handbook of Econometrics: Volume I , this second volume brings together the finestacademicsworking in econometrics today andexploresapplied econometrics, containing contributions onsubjects includinggrowth/development econometrics and applied econometrics and computing.
Author | : Dominique Guégan |
Publisher | : Springer |
Total Pages | : 225 |
Release | : 2019-03-22 |
Genre | : Business & Economics |
ISBN | : 3030026809 |
This book combines theory and practice to analyze risk measurement from different points of view. The limitations of a model depend on the framework on which it has been built as well as specific assumptions, and risk managers need to be aware of these when assessing risks. The authors investigate the impact of these limitations, propose an alternative way of thinking that challenges traditional assumptions, and also provide novel solutions. Starting with the traditional Value at Risk (VaR) model and its limitations, the book discusses concepts like the expected shortfall, the spectral measure, the use of the spectrum, and the distortion risk measures from both a univariate and a multivariate perspective.