This paper studies the link between the main sources of fundamental risk and asset returns by using the common components of a large number of macroeconomic time series variables as factors in a pricing model. A three-factor model with two common components and the market return as factors is found to explain the crosssection of size and book-to-market sorted stock portfolios better than standa...

We show that decomposing macroeconomic risks across horizon is key to uncover a tight link between risk premia and the real economy. Exposure in four-year returns to innovations in macroeconomic growth and volatility with a matching half-life of over four years is priced in a wide variety of test assets. Shorter-term risks are not priced. Importantly, we show that long-term growth and volatilit...

We assess and apply the term-structure model introduced by Nelson and Siegel (1987) and re-interpreted by Diebold and Li (2003) as a modern three-factor model of level, slope and curvature. First, we ask whether the model is a member of the affine class, and we find that it is not. Hence the poor forecasting performance recently documented for affine term structure models in no way implies that...

Size and book to market ratio are both highly correlated with the average returns of common stocks. Fama and French (1993) argue that these effects are proxies for factors of risk. In this study, we try to test the three factor model of Fama and French and the Capital Asset Pricing Model on French Stock Market. We use returns on the Fama and French six portfolios sorted by size and book to mark...

This paper addresses the problem of hedging a portfolio of fixed-income cashflows. We first briefly review the traditional duration hedging method, which is heavily used by practitioners. That approach is based on a series of very restrictive and simplistic assumptions, including the assumptions of a small and parallel shift in the yield curve. We know however that large variations can affect t...

I examine determinants of stochastic relative risk aversion in conditional asset pricing models. I first develop time-series specification tests with nonlinear state-space models with heteroskedasticity based on Merton (1973)’s ICAPM. I then established the following facts. First, the surplus consumption ratio implied by the external habit formation model is the most important determinant of re...

The study examined the validity of the Turkish versions of three forgiveness-related questionnaires: the Conceptualizations of Forgiveness Questionnaire, the Forgivingness Questionnaire, and the Disposition to Seek Forgiveness Questionnaire. These questionnaires were translated from English to Turkish. The study also compared Turkish and French participants’ scores on these scales. The sample c...

The chances that a teacher will intervene in a case of bullying appear to be associated with several variables, which may be resumed as the confidence that he has in his capability to deal with problems at school. In accordance with Social Cognitive Theory and Attribution Theory, the three-factor model of self-confidence was used to investigate the differences between preservice teachers (PSTs)...

This paper adopts the methodology used by Fama and French (1993) to construct two measures of liquidity risk. These liquidity proxies solve the empirical issue of comparability between risk factors by utilizing the standardized unit of risk first proposed for size and value effects. As far as I know, this has not been done before. Modeling these additional liquidity premiums indicate an improve...