Hello, Login
X

Forgot Password?

Join Us

to start. Not a member? Join Today!
LinkedIn Join us on
Investment Management Information
“Bridging the theory & practice of investment management”
Email
Advanced Search →
  • Home
  • Journal
    • About
    • Subscribe to the Journal
      • Subscriptions
      • Library Subscriptions
    • Harry M. Markowitz Award
    • Submit a Paper
      • Article Guidelines
      • Practitioner’s Guidelines
    • Reprints & Permissions
    • Advertising
  • Conferences
    • JOIM Conference Events
    • About
    • Membership
    • Board Members
    • Sponsorship
  • Library Access
  • Contact
  • Help

0 comments / 29/04/2015 / the JOIM / Archives, Articles

Equity Indices’ Returns: Contingent Claims on GDP Stochastic Movements

Volume 13, Number 2, Second Quarter 2015

Thomas S.Y. Ho and Sang Bin Lee

This paper proposes an equity index contingent claim model. The model assumes that the equity broad-based market indices’stochastic movements are contingent to macroeconomic risk factors that are derived from Ho et al.’s (HPS, 2012, 2013) and Ho and Lee’s (HL, 2015b, 2015c) theoretical models. The results show that these factors can explain the equity indices’ returns reasonably well.

Our model accounts for the complex lagged effect of GDP growth rate modeled by HPS and estimated by HL, and determines the sensitivities of a market index to the stochastic GDP multiple factors. We show that the S&P Index seems to have anticipated the Great Recession and the higher growth rate of the current recovery. The results also show that the market premiums of Dow Jones and NYSE indices move mostly in tandem with those of S&P. However, such as not the case with NASDAQ and Russell. The model can be used for asset allocation and hedging in investment strategies, and we have provided multiple hedging strategies in this paper to illustrate some applications of our model.

0 comments… add one
Cancel reply

Leave a Comment

Next Article: A Structural Macro-Financial Model an Macro-Risk Management

Previous Article: PRACTITIONER’S DIGEST

JOIM

    Library Access

    Subscribe to the Journal
    Submit a Paper
    Harry M. Markowitz Award
    Editorial Board
    Upcoming Conferences

    Edit Profile

Recent Comments

    JOIM

      About the JOIM
    • Library Access
    • Subscribe to the Journal
    • Submit a Paper
    • Editorial Board
    • Harry M. Markowitz Award
    • Reprints & Permissions
    • Advertising
    • Terms and Conditions

    JOIM Conference Series

    • About
    • Upcoming Conferences
    • Membership
    • Board Members
    • Sponsorship Opportunities
    • Terms & Conditions
    Speaker Reimbursement Policy

    Contact

    Journal Of Investment Management (JOIM)
    3658 Mt. Diablo Blvd., Suite 200
    Lafayette, CA 94549
    www.joim.com

    customerservice @ joim.com
    (925) 299-7800

    Copyright 2019 — Journal Of Investment Management design by SEO Web Designers