On the propagation of scale-dependent macroeconomic shocks into asset prices

Xyngis, Georgios (2016) On the propagation of scale-dependent macroeconomic shocks into asset prices. Doctoral thesis, University of East Anglia.

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Abstract

This thesis focuses on the propagation of scale-specific (i.e., horizon-dependent) macroeconomic
shocks into asset prices. In particular, chapter 1 provides an introduction to the theory and methods
necessary for understanding scale-dependencies in financial economics. First, I present the
multiresolution-based decompositions for weakly stationary time series of Ortu et al. (2013) and
discuss its connection with other techniques in the literature. Next, I analyse the power and size
properties of multi-scale variance ratio tests that distinguish a white noise process from a process
whose scale-dependent components are serially correlated. Finally, I present an extension of the
framework of Bandi et al. (2016) for scale-specific predictability. In chapter 2, I show that a single
factor that captures assets' exposure to business-cycle variation in macroeconomic uncertainty can
explain the level and cross-sectional differences of asset returns. In addition, I find that - in contrast
with previous studies in the literature - macro uncertainty is not a valid risk factor under the
ICAPM. Chapter 3 provides an empirical assessment of Epstein-Zin preferences in the frequency
domain. I demonstrate that the strict conditions implied by the spectral decomposition of recursive preferences
are not empirically satisfied. That is, macroeconomic shocks with frequencies lower than
the business-cycle are not robustly priced in asset prices.

Item Type: Thesis (Doctoral)
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Depositing User: Jackie Webb
Date Deposited: 28 Jun 2017 14:07
Last Modified: 28 Jun 2017 14:07
URI: https://ueaeprints.uea.ac.uk/id/eprint/63948
DOI:

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