Macroeconomic-Based Risk Factor Models

Macroeconomic-Based Risk Factor Models -...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 9-1Macroeconomic-Based Risk Factor Models•Security return are governed by a set of broad economic influences in the following fashion by Chen, Roll, and Ross in 1986 (Exhibit 9.3)where:Rm= the return on a value weighted index of NYSE-listed stocksMP=the monthly growth rate in US industrial productionDEI=the change in inflation, measured by the US consumer price indexUI=the difference between actual and expected levels of inflationUPR=the unanticipated change in the bond credit spreadUTS= the unanticipated term structure shift (long term less short term RFR)ittititititimtiiiteUTSbUPRbUIbDEIbMPbRbaR+++++++=][6543219-2Exhibit 9.39-3•Burmeister, Roll, and Ross (1994) analyzed the predictive ability of a model based on the following set of macroeconomic factors.–Confidence risk–Time horizon risk–Inflation risk–Business cycle risk–Market timing risk Macroeconomic-Based Risk Factor Models9-4Microeconomic-Based Risk Factor Models•Fama and French (1993) developed a multifactor model specifying the risk...
View Full Document

This note was uploaded on 01/24/2012 for the course FIN 4360 taught by Professor Davidbray during the Spring '12 term at Kennesaw.

Page1 / 12

Macroeconomic-Based Risk Factor Models -...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online