Global Stock Markets

1. Front Matter

   Pages I-XIX

   PDF

2. Introduction

   • Wolfgang Drobetz

   Pages 1-7

3. Theory of asset pricing

   • Wolfgang Drobetz

   Pages 9-70

4. Theory of international asset pricing

   • Wolfgang Drobetz

   Pages 71-100

5. Time varying expected returns and the business cycle on international stock markets

   • Wolfgang Drobetz

   Pages 101-153

6. Testing a conditional version of the consumption-based asset pricing model

   • Wolfgang Drobetz

   Pages 155-208

7. Volatility bounds for stochastic discount factors on global financial markets

   • Wolfgang Drobetz

   Pages 209-258

8. Mean reversion and rational pricing on global stock markets

   • Wolfgang Drobetz

   Pages 259-303

9. On the contributions of this study

   • Wolfgang Drobetz

   Pages 305-308

10. Back Matter

    Pages 309-332

    PDF

"While the state-preference approach is perhaps more general than the mean­ variance approach and provides an elegant framework for investigating theo­ retical issues, it is unfortunately difficult to give it empirical content. " I The state of the art in asset pricing has substantially changed over the past years. While the seminal CAPM represents an equilibrium model derived under rather restrictive assumptions on preferences or return distributions and places a lot of emphasis on the efficiency of a somehow arbitrary market portfolio, subsequent models were much less restrictive with respect to the underlying economic struc­ ture. For example, the arbitrage pricing theory maintains the linear relationship between risk and return simply by assuming the absence of arbitrage profits. While empirically more tractable than the CAPM, the main drawback of arbitrage pricing models is that they do not provide much insight into the economic and dynamic nature of risk premia. The "conditional" CAPM provides an elegant econometric framework to characterize how changing economic conditions de­ termine the variability of multiple risk premia. However, this framework still re­ quires some rather ad-hoc assumptions about the economic nature of the pricing kernel. An ingenious next step in asset pricing modeling was therefore to revert the question to be addressed. Instead of placing strong restrictions on distribu­ tions and preferences, observed returns are used to derive restrictions which must be imposed on the stochastic properties of the pricing kernel. A simple Euler-type equation is typically used to characterize that approach.

• International Financial Market
• arbitrage
• asset pricing
• asset pricing model
• business
• business cycle
• econometrics
• efficiency
• equilibrium
• financial market
• financial markets
• modeling
• portfolio
• pricing
• science and technology

Dr. Wolfgang Drobetz ist Assistent am Schweizerischen Institut für Banken und Finanzen der Universität St. Gallen, wo er bei Prof. Dr. Heinz Zimmermann promovierte.

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