Empirical tests of the consumption-oriented CAPM. (consumption-oriented capital asset price model)

Article Abstract:

The empirical implications of the consumption-oriented capital asset pricing model (CCAPM) are examined, and its performance is compared with a model based on the market portfolio. The CCAPM is estimated after adjusting for measurement problems associated with reported consumption data. The CCAPM is tested using betas based on both consumption and the portfolio having the maximum correlation with consumption. As predicted by the CCAPM, the market price of risk is significantly positive, and the estimate of the real interest rate is close to zero. The performances of the traditional CAPM and CCAPM are about the same. (Reprinted by permission of the publisher. )

Risk management, Pricing, Consumption (Economics), Capital assets pricing model, Capital asset pricing model

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A utility-based model of common stock price movements

Article Abstract:

Stock prices can be studied by using a model based of time-series behavior. The model is based on an information set consisting of aggregate consumption statistics, aggregate dividend information and past stock prices, and uses relative risk aversion as a constant, such that four time series are developed for analysis. The model uses aversion consumption information, incorporating distinctions between internal and spot consumption. Results of this model's application to historical data reveal it to be more accurate than previous models developed using constant discount rate information.

Models, Prices and rates, Stocks, Securities, Stock prices, Stock price forecasting

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Pricing risk-adjusted deposit insurance: an option-based model

Article Abstract:

A method of calculating deposit insurance premiums from market data is developed that uses isomorphic relationships existing between equities and call options and between the insurance and the put option. Asset values and volatilities are determined according to market values of various forms of equity. Also discussed are market perceptions of FDIC bank bail-out policies and rank orderings of premiums by cost.

Analysis, Economic aspects, Deposit insurance

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