Dynamic Leverage Asset Pricing∗
نویسندگان
چکیده
We empirically investigate predictions from alternative intermediary asset pricing theories. The theories distinguish themselves in their use of intermediary equity or leverage as pricing factors or forecasting variables. We find strong support for a parsimonious dynamic pricing model based on broker-dealer leverage as the return forecasting variable and shocks to broker-dealer leverage as a cross-sectional pricing factor. The model performs well in comparison to other intermediary asset pricing models as well as benchmark pricing models, and extends the cross-sectional results by Adrian, Etula, and Muir (2013) to a dynamic setting.
منابع مشابه
Leverage Asset Pricing
We investigate intermediary asset pricing theories empirically and find strong support for intermediary book leverage as the relevant state variable. A parsimonious dynamic pricing model that uses detrended broker-dealer leverage as a price of risk variable, and innovations to broker-dealer leverage as pricing factor is shown to perform well in time series and cross sectional tests of a wide va...
متن کاملDynamic Pricing with Periodic Review and a Finite set of Prices with Cancellation
In this paper, three dynamic pricing models are developed and analyzed. We assume a limited number of a particular asset is offered for sale over a period of time. This asset is perishable and can be an inventory or a manufacturing capacity. During each period, the seller sets a price for this asset. This price is selected from a predetermined discrete set. The maximum amount which a customer i...
متن کاملThe Public Market Equivalent and Private Equity Performance
We show that the public market equivalent (PME) approach [Kaplan and Schoar (2005)] is equivalent to assessing the performance of PE investments using Rubinstein’s dynamic version of the capital asset pricing model [Rubinstein (1976)]. Two insights follow. First, we do not have to compute betas of PE investments, and any changes in PE cash flow betas due to changes in financial leverage, operat...
متن کاملProperties of Asset Prices and Costs of Sticky Prices
Operating leverage, the fraction of fixed costs of production in total costs, has recently attracted considerable attention in the asset pricing literature. Indeed, the theoretical asset pricing literature often relies on some form of operating leverage to rationalize the value premium, the fact that firms with currently low valuations compared to assets in place have higher subsequent returns ...
متن کاملIncome from Asset sales, Earnings Change, and Leverage
Due to the fact that assets are recorded at their historical value and they may include unrealized gains (losses), managers may manipulate earnings through the sale of these assets and provide financial information which is not accurate and reliable. The aim of this study is to investigate the relationship between income from asset sales, earnings change and leverage of companies listed on Tehr...
متن کامل