9 votes
Accepted

Inflation effect on FX rates

Edit: adding some references (main body is untouched) Kenneth Rogoff and Richard Meese received an incredulous reaction to their now-famous paper showing that random-walk (RW) forecasts outperform ...
AKdemy's user avatar
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8 votes

Financial economics vs finance

Financial economics is what economics calls finance. Finance is what finance calls finance. Less flippantly though, there's a long debate on whether finance is a subfield of economics, and this ...
Matthew Gunn's user avatar
  • 6,944
7 votes

What data sources are available online?

Here's a snippet of a detailed list of data sources and tools which available on my blog at http://the-world-is.com/blog/resources/general-investor-resources/. Fundamental Financial Data ...
6 votes
Accepted

If markets are efficient, why are most returns systematically high?

What you describe is known as the Equity Premium Puzzle - and it really is, as the name says, a real enigma: "The equity premium puzzle (EPP) is a phenomenon that describes the anomalously higher ...
vonjd's user avatar
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6 votes

Can we think of Overnight Index Swaps as short-term IRS?

An Interest Rate Swap (IRS) normally refers a swap between a fixed rate and a floating rate. Floating rate being a single fixing for each accrual period and payment. An overnight indexed interest-rate ...
David Duarte's user avatar
  • 5,815
4 votes
Accepted

Brexit implied probability

The general formula for conversion of "a to b" odds to a probability is $p=\frac{b}{a+b}$ http://www.calculatorsoup.com/calculators/games/odds.php So 8/15 remain implies remain with probability 0....
nbbo2's user avatar
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4 votes
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Could we have prevented the World Economic Crisis in 2008?

U.S. Government DID save American International Group (AIG) from bankruptcy, since it was considered too big to fail, actually: a lot of financial institutions were insured by AIG. This Investopedia ...
simmy's user avatar
  • 585
4 votes

What data sources are available online?

Our startup SimFin, provides both historical and actual data for free, since we couldn't afford the pricey premium solutions back when we were students and wanted to overcome the hegemony of the data ...
4 votes
Accepted

What is the relation between Relative Risk Aversion and Market Price of Risk

In most economic models the risk aversion coefficient is definitely related to the equity premium. Assuming utility is CRRA (as you mention): \begin{equation} U(C_t) = \frac{C_t^{1-\gamma}}{1-\...
phdstudent's user avatar
  • 8,306
4 votes

If markets are efficient, why are most returns systematically high?

Suppose markets are perfectly efficient and asset prices reflect all available information. Under this assumption one expects current prices to be non-biased estimators of future prices. It is a ...
fni's user avatar
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4 votes
Accepted

Can we think of Overnight Index Swaps as short-term IRS?

The concept is similar, but the mechanics are slightly different. Making a quarterly payment based on 3-month Libor is fine, but making daily payments of the overnight rate is inconvenient (too much ...
nbbo2's user avatar
  • 11.3k
3 votes

If markets are efficient, why are most returns systematically high?

We know that: \begin{equation} R_{t+1} = \frac{P_{t+1} + D_{t+1}}{P_t} \end{equation} After some algebra and taking logs we can write the returns as: \begin{equation} r_{t+1} = k + \rho (p_{t+1} - ...
phdstudent's user avatar
  • 8,306
3 votes
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Can tobin's Q value for a firm be negative?

No, it is not possible for Tobin's Q to be negative in any normal situation. Mathematically it is true that if the 'short term assets' figure is very large (because of a data error or otherwise) the ...
Alex C's user avatar
  • 9,372
3 votes

Cashflow Risk vs Discount Risk

The cash flow news / discount rate news decomposition is given by $$r_{t+1}-\mathbb{E}_t[r_{t+1}]=(\mathbb{E}_{t+1}-\mathbb{E}_t)\sum_{j=0}^{\infty}\rho^j\Delta d_{t+1+j}-(\mathbb{E}_{t+1}-\mathbb{E}...
fes's user avatar
  • 1,727
3 votes
Accepted

Cashflow Risk vs Discount Risk

The answer to your question could fill an entire asset pricing text book. Your question mixes theory and empirics. A different way of looking at it is to look at the identity: $$ 1 = E[M_t R_t]$$ To ...
phdstudent's user avatar
  • 8,306
3 votes

Tech companies valuation

If we talk about tech stocks in general, a majority of their value is tied up in more distant cash flows / terminal value in a standard DCF analysis. So if interest rates go up, the more distant cash ...
Knio's user avatar
  • 31
2 votes

What data sources are available online?

CQG Inc. https://www.cqgdatafactory.com/ - historical bar and time sales data (ticks) https://develop.cqg.com/qd/?page=ContinuumDocumentation - api for getting realtime, historical data and trade ...
2 votes

What data sources are available online?

There is also a related question on the Economics site: https://economics.stackexchange.com/questions/4679/what-are-some-good-repositories-for-economic-data Answers from there: The American Economic ...
2 votes

What data sources are available online?

EDIT: Hi, I'm incredibly sorry. I'm archiving tendollardata.com and chartsonlygoup.com (link), as of April 1, 2021. All data will only be up to December 31, 2020. I feel compelled to be on a new ...
2 votes
Accepted

What relevance might the Modigliani-Miller theorem have for weight of evidence?

I understand your question to be, "Does the Modigliani-Miller theorem have any relevance for forecasting the probability of default based upon debt to equity ratios?" Not really. The Modigliani-...
Matthew Gunn's user avatar
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2 votes
Accepted

When a particular bond is delivered, why there is the need to define a conversion factor? What is its utility?

The purpose of conversion factor is to make bonds in the delivery basket more equally deliverable (theoretically anyways, but the process is not perfect). This is an important design decision for ...
Helin's user avatar
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2 votes
Accepted

Valuation functional

There was an error in my professors question he changed $$P = \begin{pmatrix} 2\\ 5/9 \end{pmatrix}$$ Thus when we fix $q_2$ we get $$q = (5/9 - q_2,q_2,6/9 - q_2)$$ Thus for $q_2\in (0,5/9)$ all $q$'...
Wolfy's user avatar
  • 728
2 votes

Could we have prevented the World Economic Crisis in 2008?

Regarding how the rating agencies gave AAA ratings to CDOs and the like that clearly did not deserve those ratings - straightforward answer. The SEC licences all the ratings agencies as "nationally ...
Bikenfly's user avatar
  • 454
2 votes

Central Bank intervention in forex market

They don't know how much intervention will be required to keep the currency at a given level. It depends how much other market participants want to resist the move. If the central bank is relatively ...
dm63's user avatar
  • 17.1k
2 votes

Central Bank intervention in forex market

They can simply place a (very large) limit order at the determined price level(s). For example, when the SNB wanted to keep EUR/CHF above 1.20 they had a large buy order at 1.20 (i.e. they agreed to ...
Chris Taylor's user avatar
  • 5,911
2 votes

How does the efficient market hypothesis fit with the rapid changes in prices?

It depends on which form of EMH you're considering as to provide a rationale. Strong-form EMH could or would assert there's private information potentially changing hands that agents are acting on ...
Chris's user avatar
  • 1,643
2 votes
Accepted

Equilibrium in the Kyle (1985) model

There are a few works examining nonlinear strategies $X$ and the uniqueness of linear strategies in Kyle (1985). Single-Period Kyle Model Cho and El Karoui (2000) find a nonlinear strategy for the ...
kurtosis's user avatar
  • 2,900
2 votes

database for economic & finance timeseries

There are many ways to deal with this. One is to model the data with the following (sample) schema, which can be done with pretty much any database: series_id <...
Helin's user avatar
  • 11.7k
1 vote

Looking for a Book which can summaries last 20 years of economics

Read the Rise of Carry. It'll give a very original and in my opinion correct perspective of what's happened in market and economies in the past 20 years. It will be nothing like an economics book and ...
Rafael Velásquez's user avatar
1 vote

Cash flows regression on macroeconomic data

This doesn't answer your question directly but might be helpful: you won't have much data given the frequency of release of GDP composition of GDP has changed significantly over time (e.g. less VA ...
user42108's user avatar
  • 2,252

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