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Asset Pricing

Опубликовано на портале: 30-08-2003
Princeton: Princeton University Press, 2000
Тематический раздел:
Every day, the financial markets bravely price trillions of dollars in such risky securities as stocks, bonds, options, futures, and derivatives. The systematic determination of their values--asset pricing--has developed dramatically in the last few years due to advances in financial theory and econometrics. In one of the most highly anticipated books in financial economics, John Cochrane unifies and brings this science up to date for the benefit of advanced students and professionals. Cochrane traces the pricing of all assets back to a single idea--price equals expected discounted payoff--that captures the macroeconomic risks underlying each security's value. By using a single, stochastic discount factor rather than a separate set of tricks for each asset class, Cochrane builds a unified account of modern asset pricing. He presents applications to stocks, bonds, and options. Each model--consumption-based, CAPM, multifactor, term structure, and option pricing--is derived as a different specification of the discount factor. The discount factor framework also leads to a state-space geometry for mean-variance frontiers and asset pricing models. It puts payoffs in different states of nature on the axes rather than mean and variance of return, leading to a new and conveniently linear geometrical representation of asset pricing ideas. Cochrane approaches empirical work with the Generalized Method of Moments, which studies sample average prices and discounted payoffs to determine whether price does equal expected discounted payoff. He translates between the discount factor, GMM, and state-space language and the beta, mean-variance, and regression language common in empirical work and earlier theory. The book also includes a review of recent empirical work on return predictability, value and other puzzles in the cross section, and equity premium puzzles and their resolution. Written to be a summary for academics and professionals as well as a textbook for advanced graduate students, this book condenses and advances recent scholarship in financial economics.

Asset Pricing

Part I. Asset Pricing Theory
1. Consumption-Based Model and Overview

    1.1 Basic Pricing Equation
    1.2 Marginal Rate of Substitution/Stochastic Discount Factor
    1.3 Prices, Payoffs, and Notation
    1.4 Classic Issues in Finance
    1.5 Discount Factors in Continuous Time
2. Applying the Basic Model
    2.1 Assumptions and Applicability
    2.2 General Equilibrium
    2.3 Consumption-Based Model in Practice
    2.4 Alternative Asset Pricing Models: Overview
3. Contingent Claims Markets
    3.1 Contingent Claims
    3.2 Risk-Neutral Probabilities
    3.3 Investors Again
    3.4 Risk Sharing
    3.5 State Diagram and Price Function
4. The Discount Factor
    4.1 Law of One Price and Existence of a Discount Factor
    4.2 No Arbitrage and Positive Discount Factors
    4.3 An Alternative Formula, and x* in Continuous Time
5. Mean-Variance Frontier and Beta Representations
    5.1 Expected Return-Beta Representations
    5.2 Mean-Variance Frontier: Intuition and Lagrangian Characterization
    5.3 An Orthogonal Characterization of the Mean-Variance Frontier
    5.4 Spanning the Mean-Variance Frontier
    5.5 A Compilation of Properties of R*, Re*, and x*
    5.6 Mean-Variance Frontiers for m: The Hansen-Jagannathan Bounds
6. Relation between Discount Factors, Betas, and Mean-Variance Frontiers
    6.1 From Discount Factors to Beta Representations
    6.2 From Mean-Variance Frontier to a Discount Factor and Beta Representation
    6.3 Factor Models and Discount Factors
    6.4 Discount Factors and Beta Models to Mean-Variance Frontier
    6.5 Three Risk-Free Rate Analogues
    6.6 Mean-Variance Special Cases with No Risk-Free Rate
7. Implications of Existence and Equivalence Theorems
8. Conditioning Information
    8.1 Scaled Payoffs
    8.2 Sufficiency of Adding Scaled Returns
    8.3 Conditional and Unconditional Models
    8.4 Scaled Factors: A Partial Solution
    8.5 Summary
9. Factor Pricing Models
    9.1 Capital Asset Pricing Model (CAPM)
    9.2 Intertemporal Capital Asset Pricing Model (ICAPM)
    9.3 Comments on the CAPM and ICAPM
    9.4 Arbitrage Pricing Theory (APT)
    9.5 APT vs. ICAPM

Part II. Estimating and Evaluating Asset Pricing Models
10. GMM in Explicit Discount Factor Models
    10.1 The Recipe
    10.2 Interpreting the GMM Procedure
    10.3 Applying GMM
11. GMM: General Formulas and Applications
    11.1 General GMM Formulas
    11.2 Testing Moments
    11.3 Standard Errors of Anything by Delta Method
    11.4 Using GMM for Regressions
    11.5 Prespecified Weighting Matrices and Moment Conditions
    11.6 Estimating on One Group of Moments, Testing on Another
    11.7 Estimating the Spectral Density Matrix
12. Regression-Based Tests of Linear Factor Models
    12.1 Time-Series Regressions
    12.2 Cross-Sectional Regressions
    12.3 Fama-MacBeth Procedure
13. GMM for Linear Factor Models in Discount Factor Form
    13.1 GMM on the Pricing Errors Gives a Cross-Sectional Regression
    13.2 The Case of Excess Returns
    13.3 Horse Races
    13.4 Testing for Characteristics
    13.5 Testing for Priced Factors: Lambdas or b's?
14. Maximum Likelihood
    14.1 Maximum Likelihood
    14.2 ML is GMM on the Scores
    14.3 When Factors are Returns, ML Prescribes a Time-Series Regression
    14.4 When Factors are Not Excess Returns, Regression ML Prescribes a Cross-Sectional
15. Time Series, Cross-Section, and GMM/DF Tests of Linear Factor Models
    15.1 Three Approaches to the CAPM in Size Portfolios
    15.2 Monte Carlo and Bootstrap
16 Which Method?

Part III. Bonds and Options
17. Option Pricing
    17.1 Background
    17.2 Black-Scholes Formula
18. Option Pricing without Perfect Replication
    18.1 On the Edges of Arbitrage
    18.2 One-Period Good-Deal Bounds
    18.3 Multiple Periods and Continuous Time
    18.4 Extensions, Other Approaches, and Bibliography
19. Term Structure of Interest Rates
    19.1 Definitions and Notation
    19.2 Yield Curve and Expectations Hypothesis
    19.3 Term Structure Models--A Discrete-Time Introduction
    19.4 Continuous-Time Term Structure Models
    19.5 Three Linear Term Structure Models
    19.6 Bibliography and Comments
Part IV. Empirical Survey
20. Expected Returns in the Time Series and Cross Section
    20.1 Time-Series Predictability
    20.2 The Cross Section: CAPM and Multifactor Models
    20.3 Summary and Interpretation
21. Equity Premium Puzzle and Consumption-Based Models
    21.1 Equity Premium Puzzles
    21.2 New Models
    21.3 Bibliography
Part V. Appendix
Appendix. Continuous Time
A.1 Brownian Motion
A.2 Diffusion Model
A.3 Ito's Lemma

Author Index
Subject Index

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