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The Information in Long-Maturity Forward Rates
Eugene F. Fama,Robert R. Bliss +1 more
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In this article, 1-year forward rates on 1- to 5-year U.S. Treasury bonds are used to forecast changes in the 1-to-5-year interest rate 2-to l-years ahead, and forecast power increases with the forecast horizon.Abstract:
Current 1 -year forward rates on 1 - to 5-year U.S. Treasury bonds are information about the current term structure of 1-year expected returns on the bonds, and forward rates track variation through time in 1-year expected returns. More interesting, 1 -year forward rates forecast changes in the 1 -year interest rate 2- to l-years ahead, and forecast power increases with the forecast horizon. We attribute this forecast power to a mean-reverting tendency in the 1-year interest rateread more
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Business conditions and expected returns on stocks and bonds
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: For example, this paper found that expected returns on common stocks and long-term bonds contain a term or maturity premium that has a clear business-cycle pattern (low near peaks, high near troughs).
Book
Dynamic Asset Pricing Theory
TL;DR: The "Dynamic Asset Pricing Theory" (DAT) as discussed by the authors is a textbook for doctoral students and researchers on the theory of asset pricing and portfolio selection in multi-period settings under uncertainty.
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Investor Psychology and Asset Pricing
TL;DR: In this paper, the authors present a framework for understanding decision biases, evaluates the a priori arguments and the capital market evidence bearing on the importance of investor psychology for security prices, and reviews recent models.
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Presidential Address: Discount Rates
TL;DR: Discount-rate variation is the central organizing question of current asset-pricing research as discussed by the authors, and a survey of discount-rate theories and applications can be found in the survey.
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Default Risk in Equity Returns
Maria Vassalou,Yuhang Xing +1 more
TL;DR: In this paper, the authors used Merton's option pricing model to compute default measures for individual firms and assess the effect of default risk on equity returns and found that default risk is systematic risk.
References
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A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity
TL;DR: In this article, a parameter covariance matrix estimator which is consistent even when the disturbances of a linear regression model are heteroskedastic is presented, which does not depend on a formal model of the structure of the heteroSkewedness.
ReportDOI
A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix
Whitney K. Newey,Kenneth D. West +1 more
TL;DR: In this article, a simple method of calculating a heteroskedasticity and autocorrelation consistent covariance matrix that is positive semi-definite by construction is described.
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Large sample properties of generalized method of moments estimators
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An intertemporal capital asset pricing model
TL;DR: In this article, an intertemporal model for the capital market is deduced from portfolio selection behavior by an arbitrary number of investors who aot so as to maximize the expected utility of lifetime consumption and who can trade continuously in time.
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Trends and random walks in macroeconomic time series: Further evidence from a new approach
TL;DR: In this article, the authors present a summary of recent work on a new methodology to test for the presence of a unit root in univariate time series models, which is quite general.