On the inflation risk premium

Article Abstract:

Index-linked gilts, nominal bonds and equity assets traded in the UK between Jan. 1985 and Aug. 1991 are used to test the hypothesis of an inflation risk premium when investors may hold these three types of assets during an uncertain inflation. Results reveal an inflation risk premium as measured by the difference between the expected real return on nominal bonds and the expected real return on the index-linked gilts. The tests indicate that investors consider the effect of uncertain inflation in setting the price of assets when asset returns are affected in different ways by inflation.

Economic aspects, Investments, Capital assets

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Risk, seasonality and the asymmetric behavior of stock returns

Article Abstract:

Stock returns have been found to demonstrate seasonal and asymmetric behavior. One study found that systematic risk and return are asymmetrically related across the different months for both large and small firms. Systematic risk for both types of firms is evidently priced only in January and April. For the other months, a relationship between systematic risk and return is not found. Finally, it is also shown that risk is priced while the size of the systematic risk premium is greater for large firms than for small firms and varies across the different months.

Seasonal variations (Economics)

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Detecting linear and nonlinear dependence in stock returns: new methods derived from chaos theory

Article Abstract:

A new methodology for determining the existence of linear and nonlinear structure in a time series is introduced. It is a quantitative version of the close returns method, an approach developed especially to identify chaotic behavior. Aside from testing for the presence of linear or nonlinear structure, the new approach can also be used to determine whether a model is adequate by testing its residuals. When combined, the qualitative and the quantitative versions offer a simple methodology for determining the presence of chaotic behavior in a time series.

Models, Analysis, Chaos theory, Chaotic systems, Nonlinear theories, Time-series analysis, Time series analysis

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