scholarly journals TIME VARYING BETA (DUAL BETA): CONDITIONAL MARKET TIMING CAPM

2012 ◽  
Vol 11 (2) ◽  
Author(s):  
Rachmat Sudarsono ◽  
Suad Husnan ◽  
Eduardus Tandelilin ◽  
Erni Ekawati
Keyword(s):  
Market Timing ◽  
Idiosyncratic Risk ◽  
Time Varying ◽  
Pricing Model ◽  
Positive Slope ◽  
Volatility Feedback ◽  
Conditional Beta ◽  
Positive Shock ◽  
Positive Effect ◽  
Diversified Portfolio

Dual beta became a debate between researchers in finance especially investment and portfolio. This research test CAPM using dual beta predictions in conditional market timing. The research tested unconditional and conditional Beta, that showed linear and positive affect of return toward risk on single and multiperiods. The beta’s slope skewed but with moderate skewness, and there is no zero beta. However if the investors have les diversified portfolio, its show idiosyncratic risk and systematic risk determine the securities pricing model. Conditional beta test, showed positive slope for SML on bullish market, and negative for bearish market. There is also showed a shock to volatility because of leverage effect and or volatility feedback. The responsiveness of positive shock (bullish market) and negative (bearish market) is positive, however the magnitude of SML slope higher for bearish than bullish market. Dual beta remains consistent in explaining positive effect of risk and return. Dual beta able to reduce the idiosyncratic risk on bearish market rather than on bullish market.

The effect of economic policy uncertainty on US tourism net exports

2021 ◽  
pp. 135481662110253
Author(s):  
Abebe Hailemariam ◽  
Kris Ivanovski
Keyword(s):  
Economic Policy ◽  
Policy Uncertainty ◽  
Structural Vector Autoregression ◽  
Economic Policy Uncertainty ◽  
Vector Autoregression Model ◽  
Long Run ◽  
Negative Effect ◽  
Positive Shock ◽  
Net Export ◽  
Positive Effect

This article models the endogenously interrelated relationship between global economic policy uncertainty (EPU), world industrial production (WIP), and the demand for US tourism net export (TNX) expenditures. To do so, we apply an identified structural vector autoregression model over monthly data spanning from January 1999 to October 2020. Our findings reveal that a positive shock in WIP has a significant positive effect on demand for TNXs. In contrast, unanticipated increases in price and EPU have a statistically significant negative effect on TNXs. Our results show that, in the long run, a one standard deviation shock in global EPU explains about 26.05% of the variations in tourism net service exports.

scholarly journals Empirical Performance of Black-Scholes and GARCH Option Pricing Models during Turbulent Times: The Indian Evidence

2016 ◽  
Vol 8 (3) ◽  
pp. 123
Author(s):  
Aparna Bhat ◽  
Kirti Arekar
Keyword(s):  
Option Pricing ◽  
Closed Form Solution ◽  
Time Varying ◽  
Pricing Model ◽  
Currency Options ◽  
Pricing Models ◽  
Pricing Options ◽  
Volatility Model ◽  
Black Scholes ◽  
Option Pricing Model

Exchange-traded currency options are a recent innovation in the Indian financial market and their pricing is as yet unexplored. The objective of this research paper is to empirically compare the pricing performance of two well-known option pricing models – the Black-Scholes-Merton Option Pricing Model (BSM) and Duan’s NGARCH option pricing model – for pricing exchange-traded currency options on the US dollar-Indian rupee during a recent turbulent period. The BSM is known to systematically misprice options on the same underlying asset but with different strike prices and maturities resulting in the phenomenon of the ‘volatility smile’. This bias of the BSM results from its assumption of a constant volatility over the option’s life. The NGARCH option pricing model developed by Duan is an attempt to incorporate time-varying volatility in pricing options. It is a deterministic volatility model which has no closed-form solution and therefore requires numerical techniques for evaluation. In this paper we have compared the pricing performance and examined the pricing bias of both models during a recent period of volatility in the Indian foreign exchange market. Contrary to our expectations the pricing performance of the more sophisticated NGARCH pricing model is inferior to that of the relatively simple BSM model. However orthogonality tests demonstrate that the NGARCH model is free of the strike price and maturity biases associated with the BSM. We conclude that the deterministic BSM does a better job of pricing options than the more advanced time-varying volatility model based on GARCH.

scholarly journals HETEROGENEOUS EXPECTATIONS AND ASSET PRICE DYNAMICS

2020 ◽  
pp. 1-31 ◽  
Author(s):  
Noemi Schmitt
Keyword(s):  
Financial Markets ◽  
Asset Price ◽  
Realistic Model ◽  
Fixed Number ◽  
Time Varying ◽  
Pricing Model ◽  
Rational Agents ◽  
Asset Pricing Model ◽  
Method Of Simulated Moments ◽  
Agents Heterogeneity

Within the seminal asset-pricing model by Brock and Hommes (Journal of Economic Dynamics Control 22, 1235–1274, 1998), heterogeneous boundedly rational agents choose between a fixed number of expectation rules to forecast asset prices. However, agents’ heterogeneity is limited in the sense that they typically switch between a representative technical and a representative fundamental expectation rule. Here, we generalize their framework by considering that all agents follow their own time-varying technical and fundamental expectation rules. Estimating our model using the method of simulated moments reveals that it is able to explain the statistical properties of the daily and monthly behavior of the S&P500 quite well. Moreover, our analysis reveals that heterogeneity is not only a realistic model property but clearly helps to explain the intricate dynamics of financial markets.

A Capital Asset Pricing Model with Time-Varying Covariances

1988 ◽  
Vol 96 (1) ◽  
pp. 116-131 ◽  
Author(s):  
Tim Bollerslev ◽  
Robert F. Engle ◽  
Jeffrey M. Wooldridge
Keyword(s):  
Asset Pricing ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Time Varying ◽  
Pricing Model ◽  
Capital Asset ◽  
Asset Pricing Model
Sign in / Sign up

Export Citation Format

Share Document