Dynamic leverage asset pricing
Tobias Adrian (),
Emanuel Moench () and
Hyun Song Shin
No 625, Staff Reports from Federal Reserve Bank of New York
We empirically investigate predictions from alternative intermediary asset pricing theories. The theories distinguish themselves in their use of intermediary equity or leverage as pricing factors or forecasting variables. We find strong support for a parsimonious dynamic pricing model based on broker-dealer leverage as the return forecasting variable and shocks to broker-dealer leverage as a cross-sectional pricing factor. The model performs well in comparison to other intermediary asset pricing models as well as benchmark pricing models, and extends the cross-sectional results by Adrian, Etula, and Muir (2013) to a dynamic setting.
Keywords: dynamic asset pricing; intermediary asset pricing; leverage cycle (search for similar items in EconPapers)
JEL-codes: G10 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-ifn and nep-mac
Date: 2013, Revised 2014-12-01
Note: Previous title: “Leverage Asset Pricing”
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Working Paper: Dynamic Leverage Asset Pricing (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:625
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