Handbook of the Economics of Finance (eBook)

Cover 1
Handbook of the Economics of Finance 4
Copyright Page 5
TOC$Contents of Volume 1B 18
Introduction to the Series 6
Contents of the Handbook 8
Preface 10
CH$Chapter 10. Arbitrage, State Prices and Portfolio Theory 28
Abstract 29
Keywords 29
1. Introduction 30
2. Portfolio problems 30
3. Absence of arbitrage and preference-free results 35
4. Various analyses: Arrow–Debreu world 41
5. Capital asset pricing model (CAPM) 47
6. Mutual fund separation theory 52
7. Arbitrage pricing theory (APT) 56
8. Conclusion 57
References 57
CH$Chapter 11. Intertemporal Asset Pricing Theory 62
Abstract 64
Keywords 64
1. Introduction 65
2. Basic theory 65
3. Continuous-time modeling 84
4. Term-structure models 109
5. Derivative pricing 125
6. Corporate securities 134
References 148
CH$Chapter 12. Tests of Multifactor Pricing Models, Volatility Bounds and Portfolio Performance 166
Abstract 168
Keywords 168
1. Introduction 169
2. Multifactor asset-pricing models: Review and integration 171
3. Modern variance bounds 191
4. Methodology and tests of multifactor asset-pricing models 197
5. Conditional performance evaluation 208
6. Conclusions 217
References 218
CH$Chapter 13. Consumption-Based Asset Pricing 226
Abstract 227
Keywords 227
1. Introduction 228
2. International stock market data 233
3. The equity premium puzzle 239
4. The dynamics of asset returns and consumption 255
5. Cyclical variation in the price of risk 289
6. Some implications for macroeconomics 302
References 304
CH$Chapter 14. The Equity Premium in Retrospect 312
Abstract 313
Keywords 313
1. Introduction 314
2. The equity premium: history 314
3. Is the equity premium due to a premium for bearing non-diversifiable risk? 322
4. Is the equity premium due to borrowing constraints, a liquidity premium or taxes? 344
5. An equity premium in the future? 350
Appendix A 351
Appendix B. The original analysis of the equity premium puzzle 353
References 358
CH$Chapter 15. Anomalies and Market Efficiency 362
Abstract 364
Keywords 364
1. Introduction 365
2. Selected empirical regularities 366
3. Returns to different types of investors 379
4. Long-run returns 384
5. Implications for asset pricing 389
6. Implications for corporate finance 391
7. Conclusions 393
References 393
CH$Chapter 16. Are Financial Assets Priced Locally or Globally? 398
Abstract 399
Keywords 399
1. Introduction 400
2. The perfect financial markets model 401
3. Home bias 420
4. Flows, spillovers, and contagion 427
5. Conclusion 437
References 437
CH$Chapter 17. Microstructure and Asset Pricing 444
Abstract 445
Keywords 445
1. Introduction 446
2. Equilibrium asset pricing 447
3. Asset pricing in the short-run 448
4. Asset pricing in the long-run 458
5. Linking microstructure and asset pricing: puzzles for researchers 467
References 470
CH$Chapter 18. A Survey of Behavioral Finance 476
Abstract 477
Keywords 477
1. Introduction 478
2. Limits to arbitrage 479
3. Psychology 488
4. Application: The aggregate stock market 498
5. Application: The cross-section of average returns 510
6. Application: Closed-end funds and comovement 521
7. Application: Investor behavior 524
8. Application: Corporate finance 529
9. Conclusion 536
Appendix A 538
References 539
Finance, Optimization, and the Irreducibly Irrational Component of Human Behavior 548
CH$Chapter 19. Derivatives 552
Abstract 554
Keywords 554
1. Introduction 555
2. Background 556
3. No-arbitrage pricing relations 562
4. Option valuation 571
5. Studies of no-arbitrage price relations 589
6. Studies of option valuation models 596
7. Social costs/benefits of derivatives trading 612
8. Summary 621
References 622
CH$Chapter 20. Fixed-Income Pricing 630
Abstract 631
Keywords 632
1. Introduction 632
2. Fixed-income pricing in a diffusion setting 633
3. Dynamic term-structure models for default-free bonds 638
4. Dynamic term-structure models with jump diffusions 645
5. Dynamic term-structure models with regime shifts 646
6. Dynamic term-structure models with rating migrations 648
7. Pricing of fixed-income derivatives 654
References 665
IDX$Subject Index 670
Handbooks in Economics 695
Forthcoming Titles 698