Tests of conditional asset pricing models in the Brazilian stock market

Article Abstract:

In this paper, we test a version of the conditional CAPM with respect to a local market portfolio, proxied by the Brazilian stock index during the period 1976-1992. We also test a conditional APT model by using the difference between the 30-day rate (Cdb) and the overnight rate as a second factor in addition to the market portfolio in order to capture the large inflation risk present during this period. The conditional CAPM and APT models are estimated by the Generalized Method of Moments (GMM) and tested on a set of size portfolios created from individual securities exchanged on the Brazilian markets. The inclusion of this second factor proves to be important for the appropriate pricing of the portfolios. [C] 2001 Elsevier Science Ltd. All rights reserved. JEL classification: F3; G1; G12; G15 Keywords: Conditional CAPM; Conditional APT; Efficiency of markets; Time-varying risk and returns

Brazil, Security and Commodity Services, Securities & Commodities Services, Securities, Commodity Contracts, and Other Financial Investments and Related Activities, Methods, Stock-exchange, Stock exchanges, Pricing, Securities industry

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The world real interest rate: stochastic index number perspectives

Article Abstract:

Real interest rate is examined using simultaneous real interest rate regression across major countries on dummy variables. An analysis of the model proposed previously by Joseph Gagnon and associates indicates that the real interest rates model is an application of the stochastic approach to index numbers. By extending the method across seven OECD countries with regards to shares in trade and income, it is demonstrated that weighting does not have an impact on their differing importance on the world economy.

Research, Economic aspects, Interest rates, Organization for Economic Cooperation and Development, Index numbers (Economics)

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Target zone models with stochastic realignments: an econometric evaluation

Article Abstract:

A new set of target zone exchange rate models with stochastic devaluation risk was analyzed. The structural model was culled from the interest parity condition which held four options, namely, models with no risk of realignment, with constant devaluation risk, with time varying risk and the random walk. The model forecasts 13 of 17 realignments for the French franc and the Italian lira.

Currency devaluation, Devaluation (Currency), Franc (France), Lira (Italy)

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