Topic: Asset Pricing

1. House Price Dynamics: Fundamentals and Expectations

   Working Paper 2012-12 - Eleonora Granziera, Sharon Kozicki

   We investigate whether expectations that are not fully rational have the potential to explain the evolution of house prices and the price-to-rent ratio in the United States.

   Topic: Asset Pricing; Domestic demand and components; Economic models

2. Risk Premium, Variance Premium and the Maturity Structure of Uncertainty

   Working Paper 2012-11 - Bruno Feunou, Jean-Sébastien Fontaine, Abderrahim Taamouti, Roméo Tedongap

   Expected returns vary when investors face time-varying investment opportunities. Long-run risk models (Bansal and Yaron 2004) and no-arbitrage affine models (Duffie, Pan, and Singleton 2000) emphasize sources of risk that are not observable to the econometrician.

   Topic: Asset Pricing; Financial services

3. Central Bank Communication or the Media’s Interpretation: What Moves Markets?

   Working Paper 2012-9 - Scott Hendry

   The goal of this paper is to investigate what type of information from Bank of Canada communication statements or the market commentary based on these statements has a significant effect on the volatility or level of returns in a short-term interest rate market.

   Topic: Asset Pricing; Financial markets

4. Medium-Term Fluctuations in Canadian House Prices

   Bank of Canada Review Article: Bank of Canada Review - Winter 2011-2012 - Brian Peterson, Yi Zheng

   This article draws on theory and empirical evidence to examine a number of factors behind movements in Canadian house prices. It begins with an overview of the movements in house prices in Canada, using regional data to highlight factors that influence prices over the long run. It then turns to the central theme, that there are medium-run movements in prices not accounted for by long-run factors. Drawing on recent Bank of Canada research, the article discusses several factors behind these medium-run movements, including interest rates, expected price appreciation and market liquidity. The article concludes by identifying areas for future research that would further our understanding of fluctuations in house prices.

   Topic: Asset Pricing; Econometric and statistical methods; Market structure and pricing

5. An International Dynamic Term Structure Model with Economic Restrictions and Unspanned Risks

   Working Paper 2012-5 - Gregory Bauer, Antonio Diez de los Rios

   We construct a multi-country affine term structure model that contains unspanned macroeconomic and foreign exchange risks. The canonical version of the model is derived and is shown to be easy to estimate.

   Topic: Asset Pricing; Exchange rates; Interest rates

6. Fooled by Search: Housing Prices, Turnover and Bubbles

   Working Paper 2012-3 - Brian Peterson

   his paper develops and estimates a model to explain the behaviour of house prices in the United States. The main finding is that over 70% of the increase in house prices relative to trend during the increase of house prices in the United States from 1995 to 2006 can be explained by a pricing mechanism where market participants are ‘Fooled by Search.’

   Topic: Asset Pricing; Business fluctuations and cycles

7. A Stochastic Volatility Model with Conditional Skewness

   Working Paper 2011-20 - Bruno Feunou, Roméo Tedongap

   We develop a discrete-time affine stochastic volatility model with time-varying conditional skewness (SVS). Importantly, we disentangle the dynamics of conditional volatility and conditional skewness in a coherent way.

   Topic: Asset Pricing; Econometric and statistical methods

8. A Practical Guide to Swap Curve Construction

   Working Paper 2000-17 - Uri Ron

   The swap market has enjoyed tremendous growth in the last decade. With government issues shrinking in supply and increased price volatilities, the swap term structure has emerged as an alternative pricing, benchmark, and hedging mechanism to the government term structure.

   Topic: Asset Pricing; International financial markets