Showing 1 - 10 of 651
We document a strong co-movement between the VIX, the stock market option-based implied volatility, and monetary policy. We decompose the VIX into two components, a proxy for risk aversion and expected stock market volatility ("uncertainty"), and analyze their dynamic interactions with monetary...
Persistent link: https://www.econbiz.de/10008784723
returns after accounting for estimation error and model uncertainty, as evidenced by the performance of model combinations …
Persistent link: https://www.econbiz.de/10011083511
Three mutually uncorrelated economic disturbances that we measure empirically explain 85% of the quarterly variation in real stock market wealth since 1952. A model is employed to interpret these disturbances in terms of three latent primitive shocks. In the short run, shocks that affect the...
Persistent link: https://www.econbiz.de/10011145420
Theoretical asset pricing models routinely assume that investors have heterogeneous information. We provide direct evidence of the importance of information asymmetry for asset prices and investor demands using plausibly exogenous variation in the supply of information caused by the closure or...
Persistent link: https://www.econbiz.de/10005792510
Our objective in this paper is to examine whether one can use option-implied information to improve mean-variance portfolio selection with a large number of stocks, and to document which aspects of option-implied information are most useful for improving the out-of-sample performance of...
Persistent link: https://www.econbiz.de/10008530360
We investigate the impact of the stance and path of monetary policy on the level of credit risk of individual bank loans and on lending standards. We employ the Credit Register of the Bank of Spain that contains detailed monthly information on virtually all loans granted by all credit...
Persistent link: https://www.econbiz.de/10005661943
Abel (2002) shows that pessimism and doubt in the subjective distribution of the growth rate of consumption reduce the risk-free rate puzzle and the equity premium puzzle. We quantify the amount of pessimism and doubt in survey data on US consumption and income. Individual forecasters are, in...
Persistent link: https://www.econbiz.de/10005504545
We use prices of equity index options to quantify the impact of extreme events on asset returns. We define extreme events as departures from normality of the log of the pricing kernel and summarize their impact with high-order cumulants: skewness, kurtosis, and so on. We show that high-order...
Persistent link: https://www.econbiz.de/10004976797
This paper constructs a simple model in which asset price fluctuations are caused by sunspots. Most existing sunspot models use local linear approximations: instead, I construct global sunspot equilibria. My agents are expected utility maximizers with logarithmic utility functions, there are no...
Persistent link: https://www.econbiz.de/10011165642
We examine the pricing of financial crash insurance during the 2007-2009 financial crisis in U.S. option markets. A large amount of aggregate tail risk is missing from the price of financial sector crash insurance during the financial crisis. The difference in costs of out-of-the-money put...
Persistent link: https://www.econbiz.de/10011083289