1,329 research outputs found
Représentation VAR et test de la théorie des anticipations de la structure par terme.
This paper deals with the implications of the expectations hypothesis of the term structure on the dynamics of interest rates, which are supposed to have a restricted VAR representation. Constraints on the parameters of the restricted VAR lead us to prefer an indirect estimation based on the error-correction model. This approach is applied to euro-rates over the period 1975-96. The main results are the following: the expectations theory is well accepted for French and UK rates but largely rejected for German and US rates. Classification-jel: E43.Expectations hypothesis ; Restricted VAR representation ; “formal” test.
La mesure du ratio rendement-risque a partir du marche des euro-devises.
Nous etudions dans ce papier la relation entre le rendement et le risque pour les marches de taux sur l'euro-dollar, l'euro-mark et l'euro-franc, de 1975 à 1997. Nous testons la relation entre l'exces de rendement de portage et la volatilite a partir d'une modelisation ARCH-in-Mean. Nous trouvons tout d'abord que la variance conditionnelle évolue selon une dynamique non-stationnaire, qu'il n'existe pas d'effets d'asymetrie des chocs de rendement sur la variance et que la distribution conditionnelle la plus adaptee est la loi de Student pour l'euro-dollar et la GED pour l'euro-mark et l'euro-franc. Nous obtenons alors que la meilleure relation entre l'exces de rendement et le risque est obtenue lorsque le risque est represente par le logarithme de la volatilite pour les trois marches. Finalement, les estimations du ratio rendement-risque sont plus faibles que celles obtenues a partir des rendements boursiers, mais du meme ordre que celles issues des rendements monetaires et obligataires.Structure par terme des taux d'intérêt ; Ratio rendement-risque ; Modèle ARCH-in-Mean
Le contenu en information de la pente des taux : application au cas des titres publics français.
This paper evaluates the information content of the term structure about future changes in interest rates and changes in inflation rate, in France. A data set has been constructed, which contains zero-coupon yield curves on government bonds over the period 1980-95. The information content is generally very weak over the whole period. On the contrary, over the period 1985-95, the term structure contains information for certain maturities. On the one hand, spreads vis-Ă -vis 2-year rates are informative for future changes in short-term rates, whereas spreads vis-Ă -vis 3-year rates are informative for both future changes in short-term rates and future changes in long-term rates; on the second hand, the spreads from (2- versus 1-year rates) to (5- versus 1-year rates) and (4- versus 2-year rates) are the most informative for future changes in inflation rate.Term structure of interest rates ; Expectations hypothesis ; Fisher relation ; Information Content.
Conditional Dependency of Financial Series: An Application of Copulas.
We develop a new methodology that measures conditional dependency. We achieve this by using copula functions that link marginal distributions, here chosen to obey a GARCH-type model with time-varying skewness and kurtosis. We apply this model to daily returns of stock-market indices. We find strong evidence of persistence in dependency both for local currency and $ US denominated series. For European stock markets, we also find evidence that large simultaneous returns of either sign lead to higher subsequent dependency. We show that dependency changes through time, as well. For stock markets within Europe, dependency increased whereas it decreased since the mid 90s when involving the S&P 500 or the Nikkei. We also suggest extensions for conditional asset pricing models involving time variation of co-skewness and co-kurtosis.International correlation ; Market integration ; ARCH, Stock indices.
The Allocation of Assets Under Higher Moments
We evaluate how deviations from normality may affect the allocation of assets. A Taylor expansion of expected utility allows us to focus on certain moments and to compute numerically the optimal portfolio allocation. A decisive advantage of our approach is that it remains operational even if a large number of assets is in-volved. We obtain that for small values of the risk-aversion parameter, non-normality does not alter significantly the optimal allocation. In contrast, when the investor is strongly risk averse and restricted to invest in risky assets, we also obtain significant changes in portfolio weights.Asset allocation; Stock returns; Non-normality; Utility function
The Tail Behavior of Sotck Returns: Emerging Versus Mature Markets.
In the following paper the authors start with a review of theoretical elements of extreme value theory (evt). In the empirical section of this study they consider five mature markets, nine Asian, six Eastern European, and seven Latin American emerging markets. The tail-behavior of returns is found to be compatible with the existence of up to the third moment but not beyond. Using a subsample of countries they also demonstrate the limitations of evt. Finally they show that little can be learned from 19th century US data about presently emerging markets' tail behavior.Extreme value theory ; Generalized Pareto distribution ; Stock-market returns.
Reading the Smile: The Message Conveyed by Methods Which Infer Risk Neutral
In this study we compare the quality and information content of risk neutral densities obtained by various methods. We consider a non-parametric method based on a mixture of log-normal densities, the semi-parametric ones based on an Hermite approximation of Madan and Milne, or based on an Edgeworth expansion of Jarrow and Rudd, the parametric approach of Malz which assumes a jump-diffusion for the underlying process, and eventually Heston's approach assuming a stochastic volatility model. We apply those models on FRF/DEM exchange rate options for two dates, for various maturities. Models differ when important news hit the market (here the 1997 snap elections). The non-parametric model provides a good fit to options prices but is unable under critical circumstances to provide as much information about market participants expectations than Malz's jump-diffusion model.Risk neutral density ; Option pricing ; Exchange rate option.
La théorie des anticipations de la structure par terme : test à partir des titres publics français.
This paper focuses on the expectations hypothesis of the term structure on long-term government bonds. Standard tests (based on the relationships between the change in the long-term rate and the spread and between the change in the short-term rate and the spread) lead to a puzzle close to the one obtained by Campbell and Shiller (1991) using US data. An approach based on stationarity of excess returns and error-correction models gives more details on these results: the expectations hypothesis is widely accepted when holding return is considered whereas it is systematically rejected when rollover return is considered.Term structure of interest rates ; Expectations hypothesis ; Cointegration ; Error-correction model.
Conditional Dependency of Financial Series: The Copula-GARCH Model
We develop a new methodology to measure conditional dependency between time series each driven by complicated marginal distributions. We achieve this by using copula functions that link marginal distributions, and by expressing the parameter of the copula as a function of predetermined variables. The marginal model is an autoregressive version of Hansen’s (1994) GARCH-type model with time-varying skewness and kurtosis. Here, we extend, to a dynamic setting, the research that fo-cuses on asymmetries in correlation during extreme events. We show that, for many market indices, dependency increases subsequent to large extreme realizations. Furthermore, for several index pairs, this increase is stronger after crashes. Our model has many potential applications such as VaR measurement and portfolio allocation in non-gaussian environments.International correlation; Stock indices; Skewed Student-t distribution
Portfolio allocation in transition economies
Designing an investment strategy in transition economies is a difficult task because stock-markets opened through time, time series are short, and there is little guidance how to obtain expected returns and covariance matrices necessary for mean-variance portfolio allocation. Also, structural breaks are likely to occur. We develop an ad-hoc investment strategy with a flavor of Bayesian learning. An observation is that often an extreme event will herald a new state of the economy. We use this observation to re-initialize learning when unlikely returns materialize. By using a Cornell benchmark, we are able to show the usefulness of our strategy for certain types of re-initializations.mean-variance allocation; portfolio choice; transition economies
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