TitleEssays on financial econometrics
NameCai, Lili (author), Swanson, Norman (chair), Klein, Roger (internal member), Landon-Lane, John (internal member), Goldman, Elena (outside member), Rutgers University, Graduate School - New Brunswick,
DescriptionThis dissertation comprises of three essays in financial econometrics. The first essay discusses the efficacy of alternative simulation models of the short term interest rate. This is done by constructing consistent specification tests that allow us to carry out a "horse-race" comparing various one, two, and three factor models (possiblely with jumps), across multiple historical sample periods. We find that the choice of model for simulating the future distribution of short rates is highly sample dependent, and structural breaks appear to be an important component to be considered.
The second essay presents a model that focuses on exploring the profitability of portfolio-based trading strategies that variously combine downside risk, momentum, and mean reversion by carrying out a series of pseudo real-time trading experiments using different combination trading strategies. We find, contrary to the existing literature, that momentum effects are sensitive to value and size factors. In particular, downside risk plays an important role when portfolios are sorted based on size and value.
The third essay re-examines the empirical linkage between macroeconomic variables and financial markets. Our evaluation focuses on the use of a large variety of state-of-the-art ex-ante predictive accuracy tests as well as more standard in-sample regression diagnostics. We observe substantive shifts in the dynamics of macroeconomic factor models, which have noteworthy effects on the predictive content of the factors when used to predict returns.
NoteIncludes bibliographical references (p. 84-88)
Noteby Lili Cai
CollectionGraduate School - New Brunswick Electronic Theses and Dissertations
Organization NameRutgers, The State University of New Jersey
RightsThe author owns the copyright to this work.