We disaggregate consumption growth into components with different levels of persistence and show that a single business-cycle consumption factor can explain satisfactorily the differences in risk premia across book-to-market and size-sorted portfolios. We argue that accounting for persistence heterogeneity in consumption is important for interpreting cross-sectional risk compensations in financ...

An important challenge of portfolio allocation arises when the (true) characteristics of returns distribution are replaced by some estimates. This introduces estimation risk, which is crucial for portfolio management just like traditional financial risk. This paper contrasts with existing literature by focusing on a different measure of performance. We borrow from practitioners and evaluate dif...

A dividend imputation tax system provides shareholders with a credit (for corporate tax paid) that can be used to offset personal tax on dividend income. This paper shows how to infer the value of imputation tax credits from the prices of derivative securities that are unique to Australian retail markets. We also test whether a tax law amendment that was designed to prevent the trading of imput...

This paper develops a framework to link the expected utility analysis to real options models in order to capture the joint effects of risk aversion and irreversibility associated with real investments. It aims at modifying the theory of investment under uncertainty by incorporating decision makers’ risk preferences and allows explicitly analyzing the impacts of risk aversion, uncertainty and ir...

Aim/purpose – This study sought to assess the impact of an increased historical fixed VAT rate 14% current 15% on South African economy. Design/methodology/approach The method applied in this was based a Dynamic Computable General Equilibrium (CGE) model evaluate both and new CGE has been proven over years be suitable when evaluating assessment any shock within Enhancements were made by researc...

We estimate various SVAR models for the US in order to assess the importance of fundamental shocks in explaining stock price movements. The results show that models using real activity variables place more weight on fundamental shocks than models using dividends or earnings. However, according to all models fundamental shocks became substantially less important during the period 1982-2002 if co...

Included here are two appendices. Appendix A has information on model priors, selected material on the data, and some details on computation. Appendix B contains an extended treatment of alternative measures of stress, and alternative measures of real activity, including how these measures compare to the base case model in terms of picking up the same state probabilities and, in some cases, qua...

This study examines the relationships between stock fundamental ratios and idiosyncratic volatility from 1993 to 2010 for Australian Securities Exchange listed companies. The portfolio analysis results show that high idiosyncratic volatility companies tend to be small (measured by size), highly leveraged (measured by interest cover ratio), low profitability (measured by return on equity and ear...

This paper revisits the macroeconomic effects of government consumption in the neoclassical growth model augmented with idiosyncratic investment (or entrepreneurial) risk. Under complete markets, a permanent increase in government consumption has no long-run effect on the interest rate, the capital-labor ratio, and labor productivity, while it increases work hours due to the familiar negative w...

Using data for 1238 banks located in 94 developing and emerging countries, we explore whether the impact of bank regulation and supervision on banking risk (measured by the banks’ Z-scores) depends on bank structure. Our findings suggest that stricter regulation and supervision increases the banks’ Z-scores. Notably capital requirements and supervisory control diminish banking risk. However, th...