Results 1  10
of
343
Risks for the long run: A potential resolution of asset pricing puzzles
 JOURNAL OF FINANCE
, 1994
"... We model consumption and dividend growth rates as containing (i) a small longrun predictable component and (ii) fluctuating economic uncertainty (consumption volatility). These dynamics, for which we provide empirical support, in conjunction with Epstein and Zin’s (1989) preferences, can explain ke ..."
Abstract

Cited by 350 (30 self)
 Add to MetaCart
We model consumption and dividend growth rates as containing (i) a small longrun predictable component and (ii) fluctuating economic uncertainty (consumption volatility). These dynamics, for which we provide empirical support, in conjunction with Epstein and Zin’s (1989) preferences, can explain key asset markets phenomena. In our economy, financial markets dislike economic uncertainty and better longrun growth prospects raise equity prices. The model can justify the equity premium, the riskfree rate, and the volatility of the market return, riskfree rate, and the pricedividend ratio. As in the data, dividend yields predict returns and the volatility of returns is timevarying.
Expected stock returns and volatility
 Journal of Financial Economics
, 1987
"... This paper examines the relation between stock returns and stock market volatility. We find evidence that the expected market risk premium (the expected return on a stock portfolio minus the Treasury bill yield) is positively related to the predictable volatility of stock returns. There is also evid ..."
Abstract

Cited by 337 (8 self)
 Add to MetaCart
This paper examines the relation between stock returns and stock market volatility. We find evidence that the expected market risk premium (the expected return on a stock portfolio minus the Treasury bill yield) is positively related to the predictable volatility of stock returns. There is also evidence that unexpected stock market returns are negatively related to the unexpected change in the volatility of stock returns. This negative relation provides indirect evidence of a positive relation between expected risk premiums and volatility. 1.
A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments
 Journal of Business & Economic Statistics
, 2002
"... Weak instruments arise when the instruments in linear instrumental variables (IV) regression are weakly correlated with the included endogenous variables. In generalized method of moments (GMM), more generally, weak instruments correspond to weak identification of some or all of the unknown paramete ..."
Abstract

Cited by 181 (5 self)
 Add to MetaCart
Weak instruments arise when the instruments in linear instrumental variables (IV) regression are weakly correlated with the included endogenous variables. In generalized method of moments (GMM), more generally, weak instruments correspond to weak identification of some or all of the unknown parameters. Weak identification leads to GMM statistics with nonnormal distributions, even in large samples, so that conventional IV or GMM inferences are misleading. Fortunately, various procedures are now available for detecting and handling weak instruments in the linear IV model and, to a lesser degree, in nonlinear GMM. KEY WORDS:
The World Price of Covariance Risk
 Journal of Finance
, 1991
"... In a financially integrated global market, the conditionally expected return on a portfolio of securities from a particular country is determined by the country's world risk exposure. This paper measures the conditional risk of 17 countries. The reward per unit of risk is the world price of covarian ..."
Abstract

Cited by 164 (17 self)
 Add to MetaCart
In a financially integrated global market, the conditionally expected return on a portfolio of securities from a particular country is determined by the country's world risk exposure. This paper measures the conditional risk of 17 countries. The reward per unit of risk is the world price of covariance risk. Although the tests provide evidence on the conditional mean variance efficiency of the benchmark portfolio, the results show that countries' risk exposures help explain differences in performance. Evidence is also presented which indicates that these risk exposures change through time and that the world price of covariance risk is not constant.
Resurrecting the (C)CAPM: A CrossSectional Test When Risk Premia Are TimeVarying
 Journal of Political Economy
, 2001
"... This paper explores the ability of conditional versions of the CAPM and the consumption CAPM—jointly the (C)CAPM—to explain the cross section of average stock returns. Central to our approach is the use of the log consumption–wealth ratio as a conditioning variable. We demonstrate that such conditio ..."
Abstract

Cited by 139 (5 self)
 Add to MetaCart
This paper explores the ability of conditional versions of the CAPM and the consumption CAPM—jointly the (C)CAPM—to explain the cross section of average stock returns. Central to our approach is the use of the log consumption–wealth ratio as a conditioning variable. We demonstrate that such conditional models perform far better than unconditional specifications and about as well as the FamaFrench threefactor model on portfolios sorted by size and booktomarket characteristics. The conditional consumption CAPM can account for the difference in returns between lowbooktomarket and highbooktomarket portfolios and exhibits little evidence of residual size or booktomarket effects. We are grateful to Eugene Fama and Kenneth French for graciously providing the
Whom or what does the representative individual represent
 The Journal of Economic Perspectives
, 1992
"... Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at ..."
Abstract

Cited by 120 (4 self)
 Add to MetaCart
Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at
Junior can’t borrow: A new Perspective on the equity premium puzzle
 Quarterly Journal of Economics
, 2002
"... Ongoing questions on the historical mean and standard deviation of the return on equities and bonds and on the equilibrium demand for these securities are addressed in the context of a stationary, overlappinggenerations economy in which consumers are subject to a borrowing constraint. The key featu ..."
Abstract

Cited by 99 (11 self)
 Add to MetaCart
Ongoing questions on the historical mean and standard deviation of the return on equities and bonds and on the equilibrium demand for these securities are addressed in the context of a stationary, overlappinggenerations economy in which consumers are subject to a borrowing constraint. The key feature captured by the OLG economy is that the bulk of the future income of the young consumers is derived from their wages forthcoming in their middle age, while the bulk of the future income of the middleaged consumers is derived from their savings in equity and bonds. The young would like to borrow and invest in equity but the borrowing constraint prevents them from doing so. The middleaged choose to hold a diversified portfolio that includes positive holdings of bonds and this explains the demand for bonds. Without the borrowing constraint, the young borrow and invest in equity, thereby decreasing the mean equity premium and increasing the rate of interest.
Large Sample Sieve Estimation of SemiNonparametric Models
 Handbook of Econometrics
, 2007
"... Often researchers find parametric models restrictive and sensitive to deviations from the parametric specifications; seminonparametric models are more flexible and robust, but lead to other complications such as introducing infinite dimensional parameter spaces that may not be compact. The method o ..."
Abstract

Cited by 92 (17 self)
 Add to MetaCart
Often researchers find parametric models restrictive and sensitive to deviations from the parametric specifications; seminonparametric models are more flexible and robust, but lead to other complications such as introducing infinite dimensional parameter spaces that may not be compact. The method of sieves provides one way to tackle such complexities by optimizing an empirical criterion function over a sequence of approximating parameter spaces, called sieves, which are significantly less complex than the original parameter space. With different choices of criteria and sieves, the method of sieves is very flexible in estimating complicated econometric models. For example, it can simultaneously estimate the parametric and nonparametric components in seminonparametric models with or without constraints. It can easily incorporate prior information, often derived from economic theory, such as monotonicity, convexity, additivity, multiplicity, exclusion and nonnegativity. This chapter describes estimation of seminonparametric econometric models via the method of sieves. We present some general results on the large sample properties of the sieve estimates, including consistency of the sieve extremum estimates, convergence rates of the sieve Mestimates, pointwise normality of series estimates of regression functions, rootn asymptotic normality and efficiency of sieve estimates of smooth functionals of infinite dimensional parameters. Examples are used to illustrate the general results.
Transaction costs and predictability: Some utility cost calculations
 Journal of Financial Economics
, 1999
"... We examine the loss in utility for a consumer who ignores any or all of the following: (1) the multiperiod nature of the consumer's portfoliochoice problem, (2) the empirically documented predictability of asset returns, or (3) transaction costs. Both the costs of behaving myopically and ignoring ..."
Abstract

Cited by 90 (14 self)
 Add to MetaCart
We examine the loss in utility for a consumer who ignores any or all of the following: (1) the multiperiod nature of the consumer's portfoliochoice problem, (2) the empirically documented predictability of asset returns, or (3) transaction costs. Both the costs of behaving myopically and ignoring predictability can be substantial, although allowing for intermediate consumption reduces these costs. Ignoring realistic transaction costs ("xed and proportional) imposes signi"cant utility costs that range from 0.8 % up to 16.9 % of wealth. For the scenarios that we consider, the presence of transaction costs always increases the utility cost of behaving myopically, but decreases the utility cost of
The bootstrap
 In Handbook of Econometrics
, 2001
"... The bootstrap is a method for estimating the distribution of an estimator or test statistic by resampling one’s data. It amounts to treating the data as if they were the population for the purpose of evaluating the distribution of interest. Under mild regularity conditions, the bootstrap yields an a ..."
Abstract

Cited by 75 (1 self)
 Add to MetaCart
The bootstrap is a method for estimating the distribution of an estimator or test statistic by resampling one’s data. It amounts to treating the data as if they were the population for the purpose of evaluating the distribution of interest. Under mild regularity conditions, the bootstrap yields an approximation to the distribution of an estimator or test statistic that is at least as accurate as the