This paper presents a new test of the present value model of stock price determination, using some of the recent advances in the econometrics of seasonal time series. Unlike earlier studies which generally find stock prices, dividends, and interest rates to be characterized by standard...

This paper reviews basic notions of return variation in the context of a continuous-time arbitrage-free asset pricing model and discusses some of their applications. We first define return variation in the infeasible continuous-sampling case. Then we introduce realized measures obtained from...

Numerous empirical studies find pricing kernels that are not-monotonically decreasing; the findings are at odds with the pricing kernel being marginal utility of a risk-averse, so-called representative agent. We study in detail the common procedure which estimates the pricing kernel as the ratio...

A time series model is discussed that incorporates both permanent and transient effects. Estimation techniques are given, and the power of the likelihood ratio test is assessed. When applied to the monthly price/earnings series of the S&P 500 over the period 1871-2013, both permanent and...

We discuss the economic model and the econometric properties of the Convolution Autoregressive Process of order 1 (C-AR(1)), with focus on the simplest gaussian case. This is a first order autoregressive process in which the error terms are dependent on the lagged value of the process. We show...

We develop estimation methodology for an additive nonparametric panel model that is suitable for capturing the pricing of coupon-paying government bonds followed over many time periods. We use our model to estimate the discount function and yield curve of nominally riskless government bonds. The...

High frequency data typically exhibit asynchronous trading and microstructure noise, which can bias the covariances estimated by standard estimators. While a number of specialised estimators have been developed, they have had limited availability in open source software. HighFrequencyCovariance...

GARCH type models, with one disturbance to the return of a financial asset, have not been considered as a framework for measuring the contemporaneous correlation between the return shock and the volatility shock. We show that the contemporaneous correlation can be quantified within an EGARCH...

Option pricing should be based on a realistic process for the underlying and on the construction of a risk-neutral measure as induced by a no-arbitrage replication strategy. This paper presents a realistic and complete, "first principles,'' computation of option prices. The underlying is modeled...

We propose a more flexible range-based volatility model which can capture volatility process better than conventional GARCH approach. Considering the regime switching process is appropriate for dealing the structure change embedded in the time series data. Range-based volatility CARR model with...