منابع مشابه
Sunspots and predictable asset returns
This paper uses a stylised asset-pricing model to show that sunspots may cause asset returns to be predictable, a widely documented feature of many speculative markets. This result parallels and extends previous works showing that sunspots render asset prices excessively volatile. Journal of Economic Literature Classi cation Numbers: D84, E44, G12
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The predictability of a n asset's returns will affect the prices of options on that asset, even though predictability is typically induced by the drift, which does not enter the option pricing formula. For discretely-sampled data, predictability is linked to the parameters that do enter the option pricing formula. We construct an adjustment for predictability to the Black-Scholes formula and sh...
متن کاملWhy Are Asset Returns More Volatile during Recessions? A Theoretical Explanation
During recession, many macroeconomic variables display higher levels of volatility. We show how introducing an AR(1)-ARCH(1) driving process into the canonical Lucas consumption CAPM framework can account for the empirically observed greater volatilty of asset returns during recessions. In particular, agents' joint forecasting of levels and time-varying second moments transforms symmetric-volat...
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We examine how the evidence of predictability in asset returns a ects optimal portfolio choice for investors with long horizons. Particular attention is paid to estimation risk, or uncertainty about the true values of model parameters. We nd that even after incorporating parameter uncertainty, there is enough predictability in returns to make investors allocate substantially more to stocks, the...
متن کاملOptimal Demand for Long-term Bonds When Returns Are Predictable
This paper further explores the horizon effect in the optimal static and dynamic demand for risky assets under return predictability as documented by Barberis (2000). Contrary to the case of stocks, the optimal demand for long-term Government bonds of a buy-and-hold investor is not necessarily increasing in the investment horizon, and may in fact be decreasing for some initial levels of the pre...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2002
ISSN: 1556-5068
DOI: 10.2139/ssrn.321001