Essays in Financial Economics.
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文摘
In Chapter 1,I propose a parsimonious econometric model for the stochastic process governing the evolution of per capita consumption and stock market dividend over time. The model features stochastic volatility of consumption and dividend growth rates,and time-varying likelihood of rare disasters. I embed this time-variation of risk in an endowment economy with a representative agent and estimate the parameters from U.S. stock market data using Maximum Likelihood. Allowing for time-varying likelihood of rare disasters improves the models performance. In Chapter 2 a joint work with Kent Daniel and Ravi Jagannathan),we study the time-varying behavior of momentum strategy returns. Price momentum strategies have historically generated high positive returns with little systematic risk. However,these strategies also experience infrequent but severe losses. During 13 of the 978 months in our 1929-2010 sample,losses to a US-equity momentum strategy exceed 20 percent per month. We demonstrate that a hidden Markov model in which the market moves between latent "turbulent" and "calm" states in a systematic stochastic manner captures these high-loss episodes. The turbulent state is infrequent in our sample: the probability that the hidden state is turbulent is greater than one-half in only 20% of the months. Yet in each of the 13 severe loss months,the ex-ante probability that the hidden state is turbulent exceeds 70 percents. In Chapter 3 a joint work with Georgios Skoulakis),we suggest a simple modification of the Fama and MacBeths two pass methodology in samples with large cross sections and relatively few time series observations. Specifically,our methodology provides an asset pricing test with a large number of individual stocks returns for a finite time series. Monte Carlo evidence shows that the proposed N-asymptotic test statistics behave properly with the available panel size.