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Keywords:Asset pricing 

Speech
Bubble, bubble, toil and trouble: a dangerous brew for monetary policy: a speech at the Cato Institute’s 28th Annual Monetary Conference, Washington, D.C., November 18, 2010

Presented by Charles I. Plosser, President and Chief Executive Officer, Federal Reserve Bank of Philadelphia> Cato Institute?s 28th Annual Monetary Conference, Washington, D.C., November 18, 2010
Speech , Paper 45

Report
No good deals—no bad models

Faced with the problem of pricing complex contingent claims, investors seek to make their valuations robust to model uncertainty. We construct a notion of a model-uncertainty-induced utility function and show that model uncertainty increases investors? effective risk aversion. Using this utility function, we extend the ?no good deals? methodology of Cochrane and Sa-Requejo (2000) to compute lower and upper good-deal bounds in the presence of model uncertainty. We illustrate the methodology using some numerical examples.
Staff Reports , Paper 589

Working Paper
Inflation expectations, real rates, and risk premia: evidence from inflation swaps

This paper develops a model of the term structures of nominal and real interest rates driven by state variables representing the short-term real interest rate, expected inflation, inflation?s central tendency, and four volatility factors that follow GARCH processes. We derive analytical solutions for nominal bond yields, yields on inflation-indexed bonds that have an indexation lag, and the term structure of expected inflation. Unlike prior studies, the model?s parameters are estimated using data on inflation swap rates, as well as nominal yields and survey forecasts of inflation. The ...
Working Papers (Old Series) , Paper 1107

Report
How do treasury dealers manage their positions?

Using data on U.S. Treasury dealer positions from 1990 to 2006, we find evidence of a significant role for dealers in the intertemporal intermediation of new Treasury security supply. Dealers regularly take into inventory a large share of Treasury issuance so that dealer positions increase during auction weeks. These inventory increases are only partially offset in adjacent weeks and are not significantly hedged with futures. Dealers seem to be compensated for the risk associated with these inventory changes by means of price appreciation in the subsequent week.
Staff Reports , Paper 299

Working Paper
Do actions speak louder than words? the response of asset prices to monetary policy actions and statements

We investigate the effects of U.S. monetary policy on asset prices using a high-frequency event-study analysis. We test whether these effects are adequately captured by a single factor--changes in the federal funds rate target-and find that they are not. Instead, we find that two factors are required. These factors have a structural interpretation as a "current federal funds rate target" factor and a "future path of policy" factor, with the latter closely associated with FOMC statements. We measure the effects of these two factors on bond yields and stock prices using a new intraday ...
Finance and Economics Discussion Series , Paper 2004-66

Conference Paper
The ins and outs of LSAPs.

Proceedings - Economic Policy Symposium - Jackson Hole

Working Paper
Information diffusion based explanations of asset pricing anomalies

In this paper we develop information based factors which outperform other popular factors used in the multifactor pricing literature such as the Fama and French size and book-to-market factors. The first factor is based on the age of an asset, measured by the number of months since the asset?s IPO, while the second factor is based on the percentage of trading days an asset does not trade in a given year. Both factors attempt to capture the quality and speed of information diffusion on the market. Our information factors perform particularly well on momentum portfolios, which, Hong et al ...
Supervisory Research and Analysis Working Papers , Paper QAU07-6

Working Paper
Estimating real and nominal term structures using Treasury yields, inflation, inflation forecasts, and inflation swap rates

This paper develops and estimates an equilibrium model of the term structures of nominal and real interest rates. The term structures are driven by state variables that include the short term real interest rate, expected inflation, a factor that models the changing level to which inflation is expected to revert, as well as four volatility factors that follow GARCH processes. We derive analytical solutions for the prices of nominal bonds, inflation-indexed bonds that have an indexation lag, the term structure of expected inflation, and inflation swap rates. The model parameters are estimated ...
Working Papers (Old Series) , Paper 0810

Working Paper
Global asset pricing

Financial markets have become increasingly global in recent decades, yet the pricing of internationally traded assets continues to depend strongly upon local risk factors, leading to several observations that are difficult to explain with standard frameworks. Equity returns depend upon both domestic and global risk factors. Further, local investors tend to overweight their asset portfolios in local equity. The stock prices of firms that begin to trade across borders increase in response to this information.> ; Foreign exchange markets also display anomalous relationships. The forward rate ...
Globalization Institute Working Papers , Paper 88

Journal Article
Monetary policy and asset markets: conference summary

This Economic Letter summarizes the papers presented at a conference on "Monetary Policy and Asset Markets" held at the Federal Reserve Bank of San Francisco on February 22, 2008. ; One of the papers focused on extracting information on policy changes from the interest rate term structure and on whether investors value those policy changes or view them as an additional source of risk to be hedged. Another paper examined the extent to which subjective expectations may explain certain asset price puzzles. A third paper looked at the housing sector, quantifying the factors that drive residential ...
FRBSF Economic Letter

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