scholarly journals Stochastic Model Specification Search for Time-Varying Parameter VARs

2014 ◽  
Author(s):  
Eric Eisenstat ◽  
Joshua C. C. Chan ◽  
Rodney W. Strachan
Keyword(s):  
Stochastic Model ◽  
Model Specification ◽  
Time Varying ◽  
Time Varying Parameter ◽  
Specification Search

scholarly journals Stochastic Model Specification Search for Time-Varying Parameter VARs

2015 ◽  
Vol 35 (8-10) ◽  
pp. 1638-1665 ◽  
Author(s):  
Eric Eisenstat ◽  
Joshua C. C. Chan ◽  
Rodney W. Strachan
Keyword(s):  
Stochastic Model ◽  
Model Specification ◽  
Time Varying ◽  
Time Varying Parameter ◽  
Specification Search

Lassen sich CAPM, HCAPM und CCAPM durch konsumbasierte zeitvariable Parameterspezifikation rehabilitieren? / Can Time-varying Parameter Specification Based on Consumption Variables Rehabilitate CAPM, HCAPM and CCAPM?

2012 ◽  
Vol 232 (5) ◽  
Author(s):  
Benjamin R. Auer
Keyword(s):  
Model Specification ◽  
Market Size ◽  
Stochastic Discount Factor ◽  
Time Varying ◽  
German Market ◽  
Consumption Ratio ◽  
Portfolio Returns ◽  
Labour Income ◽  
Time Varying Parameter ◽  
Time Varying Parameters

SummaryUsing a new dataset for the German market, this article analyses whether modeling time-varying stochastic discount factor parameters in the CAPM of Sharpe (1964), the HCAPM of Jagannathan and Wang (1996) and the CCAPM of Lucas (1978) can help to explain the cross-section of book-to-market, size and industry portfolio returns. In addition to classic financial conditioning variables, we focus on modern consumption-based variables - the consumption surplus ratio of Campbell and Cochrane (1999), the consumption-wealth ratio of Lettau and Ludvigson (2001a) and the labour income to consumption ratio of Santos and Veronesi (2006). Our results show that (a) time-varying parameters can drastically increase the empirical fit of the models and that (b) a CAPM using the labour income to consumption ratio as a conditioning variable proves to be the best model specification.

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