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Dissertation/Thesis Abstract

Essays on asset pricing
by Quijano, Margot Claudette, Ph.D., The University of Texas at San Antonio, 2008, 137; 3322670
Abstract (Summary)

In this dissertation, I analyze how either political or macroeconomic factors impact asset prices or returns. In chapter 1, I include three components in the definition of wealth: the market value of debt, equity and labor income. I show the ratio of consumption-to-wealth, which includes the value of debt, enhances the predictability of stock returns at different forecast horizons and provides a plausible measure of time-varying component of risk aversion of the representative investor.

In the second chapter, I develop a measure of the consumption-to-wealth ratio that accounts for equity, debt flows, housing wealth and labor income and then relate this measure to equity returns. I estimated a measure for the change in expectation of the consumption-to-wealth ratio (u-ccw ). This measure proves to contain much more useful information than other alternative predictors, when it came to forecast stock returns. In addition, I find statistically significant evidence in favor of including the discounted future consumption growth.

Finally, in the third chapter, I analyze the impact of this uncertainty on the value of F&F debt and equity as well as the cost of the implicit subsidy by the Federal Government. I show that, counter to intuition, an increase in the likelihood that the government will not subsidize these entities may increase the expected cost of the subsidy to the government, by reducing the market value of these companies. A cap on the value of their investment portfolio is a more effective mechanism to reduce the risk exposure of the federal government.

Indexing (document details)
Advisor: Bhanot, Karan
Commitee: Beladi, Hamid, Lien, Donald, Misra, Lalatendu, Wald, John
School: The University of Texas at San Antonio
Department: Finance
School Location: United States -- Texas
Source: DAI-A 69/07, Dissertation Abstracts International
Subjects: Finance
Keywords: Asset pricing, Consumption-to-wealth ratio, Equity returns, Subsidy
Publication Number: 3322670
ISBN: 978-0-549-73860-2
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