Approximate Equilibrium Asset Prices.

Arguing that total consumer wealth is unobservable, we invert the (approximate) consumption function to reconstruct, in a world with Kreps-Porteus generalized isoelastic preferences, i) the wealth that supports the agents’ observed consumption as an optimal outcome and ii) the rate of return on the consumers’ wealth portfolio. This allows us to (approximately) price assets solely as a function of their payoffs and of consumption — in both homoskedastic or heteroskedastic environments. We compare implied equilibrium returns on the wealth portfolio to observed stock market returns and gauge whether the stock market is a good proxy for unobserved aggregate wealth.Asset pricing, Kreps-Porteus, Epstein-Zin-Weil preferences;

Can fundamentals explain cross-country correlations of asset returns?.

Previous studies show that existing correlations between national returns are higher than correlations between the national growth rates of fundamental variables. This paper examines the ability of intertemporal asset pricing models to explain cross-country correlations of national returns. We find that when capital markets are assumed to be fully integrated, a simple intertemporal general equilibrium model is able to explain the observed co-variability of domestic asset returns but generates too little variability in those returns. Results improve considerably if a less restrictive version is employed. In that setting, both domestic variability and cross-country co-variability of returns are consistent with capital market integration.Asset pricing models; Cross-country correlations;

Opening remarks by Deputy Governor of the Banco de España

Evento: XIII Germán Bernácer Prize Ceremon

Optimal portfolio policies under time-dependent returns

This paper investigates analytically and numerically intertemporal equilibrium portfolio policies under time dependent returns. The analysis is performed using a new method for obtaining approximate closed form solutions to the optimal portfolio-consumption problem that does not require the imposition of constraints on the conditional moments of consumption and that allows for autoregressive conditional heteroskedasticity in stock returns. The analytical and numerical results show that the elasticity of intertemporal substitution is irrelevant for the determination of the portfolio policy when returns are persistent and follow GARCH processes. In addition, results show that small departures from the i.i.d. assumption produce an important variability in the portfolio holdings that contrasts with the static CAPM constant portfolio policies. However, a conditional version of the static CAPM with the inclusion of a Jensen inequality correction is able to explain the overwhelming majority of the mean and almost all the variability of portfoli

Spanish banking sector in the SSM context

Evento: XIX Annual European Financials Conference. Organizado por: Goldman Sach

Ways for policy-makers to improve the use of banking statistics: what is reasonable, what is feasible and what the ssm and the banking union are calling for

Evento: VII Conferencia sobre Estadísticas 'Towards the Banking Union. Opportunities and challenges for statistics'. Organizado por: BCE (Fráncfort

Bank credit developments in Spain

Evento: EAPB Congress. Organizado por: European Association of Public Banks (EAPB

Intertemporal substitution, risk aversion and short term interest rates

This paper analyzes the implications of a general representative agent intertemporal asset pricing model on the determination of the short term interest rates. The model includes an extension of the Non-expected Utility Isoelastic Preferences that incorporates non-separability between private consumption and government expenditure. The model yields a generalized Fisher equation where the nominal interest rates are explained by the expected depreciation of the purchasing power of money, an endogenously determined required risk free rate and an inflation risk premium. The econometric estimations suggest that the common rejection of the Fisher hypothesis can be, at least, partially explained by the traditional use of ad|hoc misspecified models. On the other hand, while the inflation risk premium is estimated to be small relative to the ex-ante real interest rate, its magnitude is substantially higher than the one obtained under the standard single-good expected utility model

The recovery of the Spanish economy and recent developments of the banking system

Evento: Seminario de Bancos Centrales. Organizado por: Credit Agricol

Challenges facing the retail banking sector

Organizado por: European Savings and Retail Banking Group (ESBG