Financial Markets Efficiency and Economic Behaviour

ISBN-13: 9783031368356 / Angielski / Twarda / 2023

Gian Maria Tomat

Opis

This book reviews the efficient markets hypothesis from a behavioural finance perspective looking at the stock markets of the five largest Euro economies. It covers some key areas in finance, including efficient markets, equity premium, dividend ratio model, yield curve and term structure, all of which are concepts used to analyse pricing and other behaviour in financial markets. The book studies the term structure of interest rates describing formalizations for zero-coupon and coupon bonds and evaluates results regarding static spot rate and dynamic forward rate regressions for the Euro area. Additionally, it examines the equity premium exploiting variation in stock market returns in both time series and cross-section dimensions, and will be of interest to academics, researchers, and students of financial economics, financial markets, and behavioural finance.

Spis treści

1 Introduction 

2 Efficient markets 

2.1 Historical notes 

2.2 Arbitrage and asset pricing 

2.2.1 A discrete state-space framework

2.2.2 Asset pricing and time 

2.3 Equivalent risk-neutral valuation

2.4 Review and further readings 

3 Equity premium 

3.1 Excess stock market returns

3.2 Volatility bounds 

3.3 The capital asset pricing model 

3.4 Behavioural perspectives

4 The dividend ratio model 

4.1 A static regression framework

4.2 Empirical findings

4.3 Behavioural interpretation 

4.3.1 A log-linear approximation 

4.3.2 Heuristics and biases 

4.4 Review and further readings 

5 Bond valuation 

5.1 Discount bonds

5.2 Coupon bonds 

5.3 Taxation 

5.4 Review and further readings

6 Yield curves 

6.1 Expectations hypothesis

6.2 Forward rates

6.2.1 Spot and forward rates

6.2.2 Continuous time relations 

6.3 Term premia 

6.4 Review and further readings

7 Term structure models 

7.1 Spot rate spread regressions

7.1.1 Term spreads 

7.1.2 Regression model 

7.1.3 Estimation outcomes

7.2 Forward rate regressions 

7.3 Dynamic analysis

7.4 Behavioural perspectives 

8 Real estate market 

8.1 Housing prices

8.1.1 Housing volatility bounds 

8.1.2 Excess return regressions

8.1.3 Empirical outcomes

8.2 Rational speculative bubbles 

8.3 Mortgages 

8.4 Review and further readings 

9 Derivative securities 

9.1 Futures pricing 

9.2 Options 

9.3 Swaps 

9.4 Review and further readings

10 Conclusion

O autorze

Gian Maria Tomat is senior advisor at the Bank of Italy and provides policy and strategic advice to the Governing Board, the Board of Directors and the local administrative Directorates. He actively participates in the activities of national and international central banking working groups and has research interests in the fields of monetary and exchange rate policy, financial and real estate markets and interest rates. He has authored several articles in the areas of macroeconomics and finance and presented his work on a regular basis in workshops and conferences organized by academic institutions and international organizations. He earned a PhD in Political Economy at the University of Bologna, Italy.

Blurb

This book reviews the efficient markets hypothesis from a behavioural finance perspective looking at the stock markets of the five largest Euro economies. It covers some key areas in finance, including efficient markets, equity premium, dividend ratio model, yield curve and term structure, all of which are concepts used to analyse pricing and other behaviour in financial markets. The book studies the term structure of interest rates describing formalizations for zero-coupon and coupon bonds and evaluates results regarding static spot rate and dynamic forward rate regressions for the Euro area. Additionally, it examines the equity premium exploiting variation in stock market returns in both time series and cross-section dimensions, and will be of interest to academics, researchers, and students of financial economics, financial markets, and behavioural finance.

Gian Maria Tomat is senior advisor at the Bank of Italy and provides policy and strategic advice to the Governing Board, the Board of Directors and the local administrative Directorates. He actively participates in the activities of national and international central banking working groups and has research interests in the fields of monetary and exchange rate policy, financial and real estate markets and interest rates. He has authored several articles in the areas of macroeconomics and finance and presented his work on a regular basis in workshops and conferences organized by academic institutions and international organizations. He earned a PhD in Political Economy at the University of Bologna, Italy.