Essays in financial economics
Abstract/Contents
- Abstract
- This dissertation consists of two essays which are entitled "Learning, Dispersion of Beliefs, and Risk Premiums in an Arbitrage-free Term Structure Model" and "Risk Premiums Implicit in the Term Structure of Oil Futures Prices", and two accompanying appendices. The first essay, which is based on joint work with Marco Giacoletti and Ken Singleton, explores the properties of risk premiums implied by a dynamic term structure model (DTSM) in which the stochastic discount factor (SDF) reflects Bayesian learning and where the degree of investor dispersion of beliefs today is informative about the future paths of yields. The estimated learning rule has formal roots in the literature on Bayesian learning, and it reveals which aspects of risk and the state of the economy agents learn about and which aspects they (evidently) know from information embedded in the current yield curve. Through the lens of our arbitrage-free learning model we see that investors had full knowledge of key aspects of the pricing distribution. Furthermore, we find that, when the U.S. economy is emerging from a recession, knowledge of the extent of disagreement among professionals is informative about how today's yield curve will impact its future shape. Our learning-based DTSMs outperform the median professional forecasts as well as a random walk over the past twenty-five years, particularly during the years following recessions in the U.S. economy. The second essay, which is based on joint work with Ken Singleton, explores the nature of risk premiums within an arbitrage-free dynamic term structure model of oil futures prices. Particular attention is given to 2008 which included the boom and bust in oil prices and the subsequent global financial crisis. A novel feature of our model is that it allows for information about trading patterns in futures markets and macroeconomic developments to systematically affect variation in risk premiums within a dynamic, arbitrage-free model. This is accomplished by extending the literature on affine term structure models to accommodate the changing maturities of futures contracts. Our results suggest that both investor flows and market perceptions about future inflation had large effects on risk premiums, over and above the information in the past history of oil futures prices. With the model in hand, and the implied estimates of expected excess returns on oil contracts, we then ask if index trader activity in oil markets is related to expected future oil returns. This is one of the questions in the heated debate on the financialization of commodity markets. We document that index funds flowed into commodity markets as oil risk premiums were high, nominal interest rates were low, and the slope of the oil term structure was in backwardation.
Description
| Type of resource | text |
|---|---|
| Form | electronic; electronic resource; remote |
| Extent | 1 online resource. |
| Publication date | 2015 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Associated with | Laursen, Lars Kristoffer Tebering, Mr |
|---|---|
| Associated with | Stanford University, Graduate School of Business. |
| Primary advisor | Singleton, Kenneth J |
| Thesis advisor | Singleton, Kenneth J |
| Thesis advisor | Duffie, Darrell |
| Thesis advisor | Van Binsbergen, Jules H |
| Advisor | Duffie, Darrell |
| Advisor | Van Binsbergen, Jules H |
Subjects
| Genre | Theses |
|---|
Bibliographic information
| Statement of responsibility | Lars Kristoffer Tebering Laursen. |
|---|---|
| Note | Submitted to the Graduate School of Business. |
| Thesis | Thesis (Ph.D.)--Stanford University, 2015. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2015 by Lars Kristoffer Tebering Laursen
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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