Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/93658 
Year of Publication: 
2013
Series/Report no.: 
Staff Report No. 625
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
We investigate intermediary asset pricing theories empirically and find strong support for models that have intermediary leverage as the relevant state variable. A parsimonious model that uses detrended dealer leverage as a price-of-risk variable, and innovations to dealer leverage as a pricing factor, is shown to perform well in time series and cross-sectional tests of a wide variety of equity and bond portfolios. The model outperforms alternative specifications of intermediary pricing models that use intermediary net worth as a state variable, and it performs well in comparison to benchmark asset pricing models. We draw implications for macroeconomic modeling.
Subjects: 
return predictability
cross-sectional asset pricing
financial intermediation
macrofinance
JEL: 
G10
G12
Document Type: 
Working Paper

Files in This Item:
File
Size
568.91 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.