Q2. The following table is from the 2011 Review of Financial Studies paper by Burnside, Eichenbaum,...

 

Transcribed Image Text:

Q2. The following table is from the 2011 Review of Financial Studies paper by Burnside, Eichenbaum, Kleshchelskik, and Rebelo. Explain what the authors meant to say from this table. Table 3 Factor betas of the equally weighted carry trade portfolio Factors Intercept Panel A: Monthly Payoffs and Risk Factors (February 1976 to July 2009) CAPM Fama-French factors 0.004 (0.001) Extended C-CAPM 0.004 (0.001) 0.012 (0.005) 0.018 (0.018) 0.007 (0.008) 0.033 (0.019) Panel B: Quarterly Real Excess Returns and Risk Factors (1976Q2 to 2009Q2) C-CAPM 0.058 (0.840) -0.210 Beta(s) (0.921) -0.045 (0.031) 0.607 (0.663) 0.028 (0.033) 0.011 (0.034) 0.003 0.016 0.000 Panel A reports estimates of the equation z = a + equally weighted carry trade portfolio and ft is a scalar or vector of risk factors. The CAPM factor is the excess fi++1. where zi is the monthly nominal payoff of the return on the value-weighted U.S. stock market (Mkt - Rf), and the Fama-French factors are the Mkt - Rf. SMB, and HML factors (available from Kenneth French's database). Heteroskedasticity-robust standard errors are in parentheses. Panel B reports estimates of the equation R = a + B +et+1. where Re is the quarterly real excess return of the equally weighted carry trade portfolio and ft is a scalar or vector of risk factors. The C-CAPM factor is real per-capita consumption growth, and the extended C-CAPM factors are real per-capita consumption growth, real per-capita durables growth, and the return on the value-weighted U.S. stock market. Details of the risk factors are provided in Appendix C. Heteroskedasticity-consistent standard errors are in parentheses. 0.009 Q2. The following table is from the 2011 Review of Financial Studies paper by Burnside, Eichenbaum, Kleshchelskik, and Rebelo. Explain what the authors meant to say from this table. Table 3 Factor betas of the equally weighted carry trade portfolio Factors Intercept Panel A: Monthly Payoffs and Risk Factors (February 1976 to July 2009) CAPM Fama-French factors 0.004 (0.001) Extended C-CAPM 0.004 (0.001) 0.012 (0.005) 0.018 (0.018) 0.007 (0.008) 0.033 (0.019) Panel B: Quarterly Real Excess Returns and Risk Factors (1976Q2 to 2009Q2) C-CAPM 0.058 (0.840) -0.210 Beta(s) (0.921) -0.045 (0.031) 0.607 (0.663) 0.028 (0.033) 0.011 (0.034) 0.003 0.016 0.000 Panel A reports estimates of the equation z = a + equally weighted carry trade portfolio and ft is a scalar or vector of risk factors. The CAPM factor is the excess fi++1. where zi is the monthly nominal payoff of the return on the value-weighted U.S. stock market (Mkt - Rf), and the Fama-French factors are the Mkt - Rf. SMB, and HML factors (available from Kenneth French's database). Heteroskedasticity-robust standard errors are in parentheses. Panel B reports estimates of the equation R = a + B +et+1. where Re is the quarterly real excess return of the equally weighted carry trade portfolio and ft is a scalar or vector of risk factors. The C-CAPM factor is real per-capita consumption growth, and the extended C-CAPM factors are real per-capita consumption growth, real per-capita durables growth, and the return on the value-weighted U.S. stock market. Details of the risk factors are provided in Appendix C. Heteroskedasticity-consistent standard errors are in parentheses. 0.009

Answer rating: 100% (QA)

The table presented in the paper provides estimates of factor betas for the equally weighted carry t... View the full answer