Stock Returns and the Term Structure
Title | Stock Returns and the Term Structure PDF eBook |
Author | John Y. Campbell |
Publisher | |
Pages | 66 |
Release | 1985 |
Genre | Capital assets pricing model |
ISBN |
It is well known that in the postwar period stockreturns have tended to be low when the short term nominal interest rate is high. In this paper I show that more generally the state of the term structure of interest rates predicts stock returns. Risk premia on stocks appear to move closely together with those on 20-year Treasury bonds, while risk premia on Treasury bills move somewhat independently. Average returns on 20-year bonds have been very low relative to average returns on stocks. I use these observations to test some simple asset pricing models. First I consider latent variable models in which betas are constant and risk premia vary with expected returns on a small number of unobservable hedge portfolios. The data strongly reject a single-latent-variable model. The last part of the paper examines the relationship between conditional means and variances of returns on bills, bonds and stocks. Bill returns tend to be high when their conditional variance is high, but there is a perverse negative relationship between stock returns and their conditional variance. A model is estimated which assumes that asset returns are determined by their time-varying betas with a fixed-weight "benchmark" portfolio of bills, bonds and stocks, whose return is proportional to its conditional variance. This portfolio is estimated to place almost all its weight on bills, indicating that uncertainty about nominal interest rates is important in pricing both short- and long-term assets
Stock Returns and the Term Structure
Title | Stock Returns and the Term Structure PDF eBook |
Author | |
Publisher | |
Pages | |
Release | 1985 |
Genre | |
ISBN |
Stock Market Fluctuations and the Term Structure
Title | Stock Market Fluctuations and the Term Structure PDF eBook |
Author | Chunsheng Zhou |
Publisher | |
Pages | 52 |
Release | 1996 |
Genre | Interest |
ISBN |
Stock Returns, Term Structure, Inflation and Real Activity
Title | Stock Returns, Term Structure, Inflation and Real Activity PDF eBook |
Author | Fabio Canova |
Publisher | |
Pages | |
Release | 2014 |
Genre | |
ISBN |
This paper analyzes the empirical interdependencies among asset returns, real activity and inflation from a multi-country and international point of view. We find that nominal stock returns are significantly related to inflation only in the U.S, that the U.S. term structure of interest rates predicts both domestic and foreign inflation rates while foreign term structures do not have this predictive power, and that innovations in inflation and exchange rates induce insignificant responses of real and financial variables. An interpretation of the dynamics and some policy implications of the results are provided.
Operations Research Proceedings 2006
Title | Operations Research Proceedings 2006 PDF eBook |
Author | Karl-Heinz Waldmann |
Publisher | Springer Science & Business Media |
Pages | 590 |
Release | 2007-08-11 |
Genre | Business & Economics |
ISBN | 3540699953 |
This volume contains a selection of papers referring to lectures presented at the symposium Operations Research 2006 held at the University of Karlsruhe. The symposium presented the state of the art in Operations Research and related areas in Economics, Mathematics, and Computer Science and demonstrated the broad applicability of its core themes, placing particular emphasis on Basel II, one of the most topical challenges of Operations Research.
The Term Structure of Returns
Title | The Term Structure of Returns PDF eBook |
Author | Jules H. van Binsbergen |
Publisher | |
Pages | 37 |
Release | 2015 |
Genre | Rate of return |
ISBN |
We summarize and extend the new literature on the term structure of equity. Short-term equity claims, or dividend strips, have on average significantly higher returns than the aggregate stock market. The returns on short-term dividend claims are risky as measured by volatility, but safe as measured by market beta. These facts are hard to reconcile with traditional macro-finance models and we provide an overview of new models that can reproduce some of these facts. We relate our evidence on dividend strips to facts about other asset classes such as nominal and corporate bonds, volatility, and housing. We conclude by discussing the broader economic implications by linking the term structure of returns to real economic decisions such as hiring and investment.
Modelling and forecasting stock return volatility and the term structure of interest rates
Title | Modelling and forecasting stock return volatility and the term structure of interest rates PDF eBook |
Author | Michiel de Pooter |
Publisher | Rozenberg Publishers |
Pages | 286 |
Release | 2007 |
Genre | |
ISBN | 9051709153 |
This dissertation consists of a collection of studies on two areas in quantitative finance: asset return volatility and the term structure of interest rates. The first part of this dissertation offers contributions to the literature on how to test for sudden changes in unconditional volatility, on modelling realized volatility and on the choice of optimal sampling frequencies for intraday returns. The emphasis in the second part of this dissertation is on the term structure of interest rates.