Equilibrium Predictability, Term Structure of Equity Premia, and Other Return Characteristics

Market Closure , Liquidity Premia , and Return Predictability ∗

In his seminal work, Constantinides (1986) finds that transaction cost has only a second order effect on liquidity premia. In this paper, we show that incorporating the well-established time-varying return dynamics across trading and nontrading periods can produce a first order effect that is much greater than that found by the existing literature and comparable to empirical evidence. Surprisin...

Tail Risk Premia and Return Predictability∗

The variance risk premium, defined as the difference between the actual and riskneutral expectations of the forward aggregate market variation, helps predict future market returns. Relying on new essentially model-free estimation procedure, we show that much of this predictability may be attributed to time variation in the part of the variance risk premium associated with the special compensati...

On Nonlinear Modeling for the Predictability of Equity Return

Non-stationary time series are commonly found in nancial applications. Added to the complexity are the time-varying nature and non-linearity of accurate models for describing the dynamic behavior of these nancial time series. We extend the techniques of cointegration to handle time-varying, non-linear relationship betw een a time series (\news") and its causally a ected time series. The predict...

Predictability of Bond Risk Premia with an Affine Term Structure Model

PREDICTABILITY OF BOND RISK PREMIA WITH AN AFFINE TERM STRUCTURE MODEL by SIBEL KORKMAZ Adviser: Professor Liuren Wu This thesis focuses on zero-coupon bond risk premia. In chapter 1 first I summarize the literature that defines expectation hypothesis, time variation in bond risk premia, well known macroeconomic and variety of technical indicators which predict bond return forecasts. Then, I co...

Capturing Equity Risk Premia