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Equity Returns and Economic Shocks: A Survey of Macroeconomic Factors and the Co-movement of Asset Returns

Forrester, Andrew C
http://rave.ohiolink.edu/etdc/view?acc_num=miami1512128483719638

Abstract Details

2017, Master of Arts, Miami University, Economics.
Significant attention in the financial economics literature is given to the usage of aggregated factors in their ability to explain variability in asset returns. Whereas the Capital Asset Pricing Model (CAPM) considers the excess return on the market portfolio as the dominant source of systematic variability in asset returns, the framework of Arbitrage Pricing Theory (APT) suggests that systematic risk can be further decomposed into numerous common risk factors that underlie co-movement in asset returns. Chen, Roll, and Ross (1986) popularized empirical evaluation of macroeconomic indicators in their relation to asset returns, finding that macro-economic indicators can be useful to price assets and carry statistically significant risk premiums in sample. Following the intuition of the Roll (1977) critique, I consider the pricing of risk derived from unexpected shocks, or innovations, to a wider set of macroeconomic and capital market variables. I find that information contained in shocks to common risk factors is significantly priced in the cross-section of asset returns and differs from information contained in the Fama-French-Carhart factors.
Thomas Boulton, Ph.D. (Advisor)
George Davis, Ph.D. (Committee Member)
Tyler Henry, Ph.D. (Committee Member)
33 p.
Economics; Finance
common risk factors; co-movement; economic shocks; asset pricing; financial economics; systematic risk; portfolios; Fama-MacBeth; generalized method of moments; GMM; Fama-French;

Recommended Citations

Citations

  • Forrester, A. C. (2017). Equity Returns and Economic Shocks: A Survey of Macroeconomic Factors and the Co-movement of Asset Returns [Master's thesis, Miami University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=miami1512128483719638

    APA Style (7th edition)

  • Forrester, Andrew. Equity Returns and Economic Shocks: A Survey of Macroeconomic Factors and the Co-movement of Asset Returns. 2017. Miami University, Master's thesis. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=miami1512128483719638.

    MLA Style (8th edition)

  • Forrester, Andrew. "Equity Returns and Economic Shocks: A Survey of Macroeconomic Factors and the Co-movement of Asset Returns." Master's thesis, Miami University, 2017. http://rave.ohiolink.edu/etdc/view?acc_num=miami1512128483719638

    Chicago Manual of Style (17th edition)

miami1512128483719638
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© 2017, all rights reserved.
This open access ETD is published by Miami University and OhioLINK.