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The Effect Of Conditional Volatility, Skewness, And Excess Kurtosis On Interest Rates, Sarah H. Al Talafha
The Effect Of Conditional Volatility, Skewness, And Excess Kurtosis On Interest Rates, Sarah H. Al Talafha
University of New Orleans Theses and Dissertations
This paper examines the lognormality assumption of per capita, real consumption growth, which is a common assumption in asset pricing models. We found that shocks to household consumption growth are persistent, negatively skewed, and have excess kurtosis. Therefore, we revisited the fundamental relation between expected growth and the real risk-free rate, assuming a non-Gaussian distribution of consumption growth, and found a robust positive association between real consumption growth and real risk-free interest rate, and a negative relationship between macroeconomic uncertainty and real rates, although less in magnitude, which is consistent with both intertemporal smoothing and precautionary savings. This paper offers …
Pricing Of Idiosyncratic Risk In An Intermediary Asset Pricing Model, Hasib Ahmed
Pricing Of Idiosyncratic Risk In An Intermediary Asset Pricing Model, Hasib Ahmed
University of New Orleans Theses and Dissertations
Standard asset pricing theories suggest that only systematic risk is priced. Empirical studies report a relationship between idiosyncratic volatility or risk (IVOL) and asset price. The most common explanation for this anomaly is that households under-diversify creating a Bad Model problem. This paper uses an Intermediary Asset Pricing Model (IAPM) as a way to control for under-diversification in evaluating the relationship between IVOL and asset price. We find that IVOL premia is lower in an IAPM. Our findings indicate that under-diversification can explain the anomaly partially.