scholarly journals Likelihood-Based Dynamic Asset Pricing: Learning Time-Varying Risk Premia from Cross-Sectional Models

2020 ◽  
Author(s):  
Dennis Umlandt
Keyword(s):  
Asset Pricing ◽  
Risk Premia ◽  
Time Varying ◽  
Cross Sectional ◽  
Learning Time ◽  
Dynamic Asset Pricing

Diffusion Coefficient Estimation and Asset Pricing When Risk Premia and Sensitivities Are Time Varying

1993 ◽  
Vol 3 (2) ◽  
pp. 85-99 ◽  
Author(s):  
Marc Chesney ◽  
Robert J. Elliott ◽  
Dilip Madan ◽  
Hailiang Yang
Keyword(s):  
Diffusion Coefficient ◽  
Asset Pricing ◽  
Risk Premia ◽  
Time Varying ◽  
Coefficient Estimation

Using Stocks or Portfolios in Tests of Factor Models

2019 ◽  
Vol 55 (3) ◽  
pp. 709-750 ◽  
Author(s):  
Andrew Ang ◽  
Jun Liu ◽  
Krista Schwarz
Keyword(s):  
Asset Pricing ◽  
Risk Premia ◽  
Factor Models ◽  
Idiosyncratic Volatility ◽  
Standard Errors ◽  
Coefficient Estimates ◽  
Pricing Models ◽  
Cross Sectional ◽  
Factor Loadings ◽  
Asset Pricing Models

We examine the efficiency of using individual stocks or portfolios as base assets to test asset pricing models using cross-sectional data. The literature has argued that creating portfolios reduces idiosyncratic volatility and allows more precise estimates of factor loadings, and consequently risk premia. We show analytically and empirically that smaller standard errors of portfolio beta estimates do not lead to smaller standard errors of cross-sectional coefficient estimates. Factor risk premia standard errors are determined by the cross-sectional distributions of factor loadings and residual risk. Portfolios destroy information by shrinking the dispersion of betas, leading to larger standard errors.

International Asset Pricing and Time-Varying Risk Premia

2007 ◽  
Author(s):  
Devraj Basu ◽  
Chi-Hsiou Hung ◽  
Alexander Stremme
Keyword(s):  
Asset Pricing ◽  
Risk Premia ◽  
International Asset Pricing ◽  
Time Varying

Asset pricing, time-varying risk premia and interest rate risk

1997 ◽  
Vol 21 (3) ◽  
pp. 315-335 ◽  
Author(s):  
Mark J. Flannery ◽  
Allaudeen S. Hameed ◽  
Richard H. Harjes
Keyword(s):  
Asset Pricing ◽  
Interest Rate ◽  
Risk Premia ◽  
Interest Rate Risk ◽  
Time Varying ◽  
Rate Risk

scholarly journals A Synthesis of Two Factor Estimation Methods

2015 ◽  
Vol 50 (4) ◽  
pp. 825-842 ◽  
Author(s):  
Gregory Connor ◽  
Robert A. Korajczyk ◽  
Robert T. Uhlaner
Keyword(s):  
Fixed Point ◽  
Asset Pricing ◽  
Risk Premia ◽  
Estimation Methods ◽  
Errors In Variables ◽  
Pricing Models ◽  
Cross Sectional ◽  
Asset Pricing Models ◽  
The Common ◽  
Factor Estimation

AbstractTwo-pass cross-sectional regression (TPCSR) is frequently used in estimating factor risk premia. Recent papers argue that the common practice of grouping assets into portfolios to reduce the errors-in-variables (EIV) problem leads to loss of efficiency and masks potential deviations from asset pricing models. One solution that allows the use of individual assets while overcoming the EIV problem is iterated TPCSR (ITPCSR). ITPCSR converges to a fixed point regardless of the initial factors chosen. ITPCSR is intimately linked to the asymptotic principal components (APC) method of estimating factors since the ITPCSR estimates are the APC estimates, up to a rotation.

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