Commodity Futures Return Predictability and Intertemporal Asset Pricing

2020 ◽  
Author(s):  
John Cotter ◽  
Emmanuel Eyiah-Donkor ◽  
Valerio Potì
Keyword(s):  
Asset Pricing ◽  
Return Predictability ◽  
Commodity Futures ◽  
Intertemporal Asset Pricing

scholarly journals Is Human Capital the Sixth Factor? Evidence from US Data

2019 ◽  
Vol 8 (1) ◽  
pp. 21-55 ◽  
Author(s):  
Rahul Roy ◽  
Santhakumar Shijin
Keyword(s):  
Human Capital ◽  
Asset Pricing ◽  
Factor Model ◽  
Generalized Method Of Moments ◽  
Common Factors ◽  
Return Predictability ◽  
Pricing Model ◽  
Gmm Estimation ◽  
Asset Return ◽  
Asset Pricing Model

Problem/Relevance: Measuring the risk of an asset and the economic forces driving the price of the risk is a challengingtask that preoccupied the asset pricing literature for decades. However, there exists no consensus on the integrated asset pricing framework among the financial economists in the contemporaneous asset pricing literature. Thus, we consider and study this research problem that has greater relevance in pricing the risks of an asset. In this backdrop, we develop an integrated equilibrium asset pricing model in an intertemporal (ICAPM) framework. Research Objective/Questions: Broadly we have two research objectives. First, we examine the joint dynamics of the human capital component and common factors in approximating the variation in asset return predictability. Second, we test whether the human capital component is the unaccounted and the sixth pricing factor of FF five-factor asset pricing model. Additionally, we assess the economic and statistical significance of the equilibrium six-factor asset pricing model. Methodology: The human capital component, market portfolio, size, value, profitability, and investment are the pricing factors of the equilibrium six-factor asset pricing model. We use Fama-French (FF) portfolios of 2  3, 5  5, 10  10 sorts, 2  4  4 sorts, and the Industry portfolios to examine the equilibrium six-factor asset pricing model. The Generalized method of moments (GMM) estimation is used to estimate the parameters of variant asset pricing models and Gibbons-Ross-Shanken test is employed to evaluate the performance of the variant asset pricing frameworks. Major Findings: Our approaches led to three conclusions. First, the GMM estimation result infers that the human capital component of the six-factor asset pricing model significantly priced the variation in excess return on FF portfolios of variant sorts and the Industry portfolios. Further, the sensitivity to human capital component priced separately in the presence of the market portfolios and the common factors. Second, the six-factor asset pricing model outperforms the CAPM, FF three-factor model, and FF five-factor model, which indicates that the human capital component is a significant pricing factor in asset return predictability. Third, we argue that the human capital component is the unaccounted asset pricing factor and equally the sixth-factor of the FF five-factor asset pricing model. The additional robustness test result confirms that the parameter estimation of the six-factor asset pricing model is robust to the alternative definitions of the human capital component. Implications: The empirical results and findings equally pose the more significant effects for the decision-making process of the rational investor, institutional managers, portfolio managers, and fund managers in formulating the better investment strategies, which can help in diversifying the aggregate risks.

scholarly journals The Enterprise Multiple Investment Strategy: International Evidence

2015 ◽  
Vol 50 (4) ◽  
pp. 781-800 ◽  
Author(s):  
Christian Walkshäusl ◽  
Sebastian Lobe
Keyword(s):  
Asset Pricing ◽  
Cross Section ◽  
Investment Strategy ◽  
Return Predictability ◽  
Value Premium ◽  
Pricing Models ◽  
International Evidence ◽  
Asset Pricing Models ◽  
Promising Strategy ◽  
International Portfolio

AbstractThe enterprise multiple (EM) predicts the cross section of international returns. The return predictability of EM is similarly pronounced in developed and emerging markets and likewise strong among small and large firms. An international portfolio of low-EM firms outperforms a portfolio of high-EM firms by about 1% per month. The EM value premium is individually significant for the majority of countries, remains largely unexplained by existing asset pricing models, is robust after controlling for comovement with the respective U.S. premium, and is highly persistent for up to 5 years after portfolio formation, making it a promising strategy for investors.

Money and the C-CAPM

2009 ◽  
Vol 44 (2) ◽  
pp. 337-368 ◽  
Author(s):  
Ronald J. Balvers ◽  
Dayong Huang
Keyword(s):  
Asset Pricing ◽  
Explanatory Power ◽  
Capital Asset Pricing ◽  
Money Growth ◽  
Liquidity Shocks ◽  
A Value ◽  
Asset Pricing Models ◽  
Monetary Economy ◽  
Growth Firms ◽  
Intertemporal Asset Pricing

AbstractWe consider asset pricing in a monetary economy where liquid assets are held to lower transaction costs. The ensuing model extends the capital asset pricing model (CAPM) and the consumption CAPM by deriving real money growth as an additional factor determining returns. Empirically, the two model versions compare favorably to other theoretical asset pricing models along several dimensions, supporting the traditional intertemporal asset pricing perspective. A value premium arises because value firms are sensitive to liquidity shocks but growth firms are not. Although no alternative factor drives out the money growth factor, the conditioning CAY factors of Lettau and Ludvigson (2001b) add explanatory power.

Asset Pricing for Commodity Futures: A Puzzle

2012 ◽  
Author(s):  
Charoula Daskalaki ◽  
Alexandros Kostakis ◽  
George S. Skiadopoulos
Keyword(s):  
Asset Pricing ◽  
Commodity Futures

Commodity Risk Factors and Intertemporal Asset Pricing

2014 ◽  
Author(s):  
Joelle Miffre ◽  
Ana-Maria Fuertes ◽  
Adriin Fernnndez-PPrez
Keyword(s):  
Risk Factors ◽  
Asset Pricing ◽  
Intertemporal Asset Pricing
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