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Brandt, Michael W.

Overview
Works: 29 works in 164 publications in 2 languages and 966 library holdings
Genres: History 
Roles: Author, Creator
Classifications: HB1, 330.072
Publication Timeline
Key
Publications about Michael W Brandt
Publications by Michael W Brandt
Most widely held works by Michael W Brandt
High- and low-frequency exchange rate volatility dynamics : range-based estimation of stochastic volatility models by Sassan Alizadeh( Book )
15 editions published in 2001 in English and held by 50 libraries worldwide
Abstract: We propose using the price range in the estimation of stochastic volatility models. We show theoretically, numerically, and empirically that the range is not only a highly efficient volatility proxy, but also that it is approximately Gaussian and robust to microstructure noise. The good properties of the range imply that range-based Gaussian quasi-maximum likelihood estimation produces simple and highly efficient estimates of stochastic volatility models and extractions of latent volatility series. We use our method to examine the dynamics of daily exchange rate volatility and discover that traditional one-factor models are inadequate for describing simultaneously the high- and low-frequency dynamics of volatility. Instead, the evidence points strongly toward two-factor models with one highly persistent factor and one quickly mean-reverting factor
Price discovery in the U.S. treasury market : the impact of orderflow and liquidity on the yield curve by Michael W Brandt( Book )
13 editions published between 2000 and 2003 in English and held by 45 libraries worldwide
We examine the role of price discovery in the U.S. Treasury market through the empirical relationship between orderflow, liquidity, and the yield curve. We find that orderflow imbalances (excess buying or selling pressure) can account for as much as 26 percent of the day-to-day variation in yields on days without major macroeconomic announcements. The effect of orderflow on yields is permanent and strongest when liquidity is low. All of the evidence points toward an important role of price discovery on understanding the behavior of the yield curve
Time-consistent no-arbitrage models of the term structure by Michael W Brandt( Book )
11 editions published in 2003 in English and held by 44 libraries worldwide
We present an econometric procedure for calibrating no-arbitrage term structure models in a way that is time-consistent and robust to measurement errors. Typical no-arbitrage models are time-inconsistent because their parameters are assumed constant for pricing purposes despite the fact that the parameters change whenever the model is recalibrated. No-arbitrage models are also sensitive to measurement errors because they fit exactly each potentially contaminated bond price in the cross-section. We overcome both problems by evaluating bond prices using the joint dynamics of the factors and calibrated parameters and by locally averaging out the measurement errors. Our empirical application illustrates the trade-off between fitting as well as possible and overfitting the cross-section of bond prices due to measurement errors. After optimizing this trade-off, our approach fits almost exactly the cross-section of bond prices at each date and produces out-of-sample forecast errors that beat a random walk benchmark and are comparable to the results in the affine term structure literature. We find that non-linearities in the pricing kernel are important, lending support to quadratic term structure models
The effect of macroeconomic news on beliefs and preferences : evidence from the options market by Alessandro Beber( Book )
11 editions published in 2003 in English and held by 42 libraries worldwide
Abstract: We examine the effect of regularly scheduled macroeconomic announcements on the beliefs and preferences of participants in the U.S. Treasury market by comparing the option-implied state-price density (SPD) of bond prices shortly before and after the announcements. We find that the announcements reduce the uncertainty implicit in the second moment of the SPD regardless of the content of the news. The changes in the higher-order moments, in contrast, depend on whether the news is good or bad for economic prospects. Using a standard model for interest rates to disentangle changes in beliefs and changes in preferences, we demonstrate that our results are consistent with time-varying risk aversion in the spirit of habit formation
International risk sharing is better than you think : or exchange rates are much too smooth by Michael W Brandt( Book )
11 editions published in 2001 in English and held by 41 libraries worldwide
Exchange rates depreciate by the difference between the domestic and foreign marginal utility growths. Exchange rates vary a lot , as much as 10% per year. However, equity premia imply that marginal utility growths vary much more, by at least 50% per year. This means that marginal utility growths must be highly correlated across countries -- international risk sharing is better than you think. Conversely, if risks really are not shared internationally, exchange rates should vary more than they do -- exchange rates are much too smooth. We calculate an index of international risk sharing that formalizes this intuition in the context of both complete and incomplete capital markets. Our results suggest that risk sharing is indeed very high across several pairs of countries
Dynamic portfolio selection by augmenting the asset space by Michael W Brandt( Book )
10 editions published in 2004 in English and held by 39 libraries worldwide
We present a novel approach to dynamic portfolio selection that is no more difficult to implement than the static Markowitz model. The idea is to expand the asset space to include simple (mechanically) managed portfolios and compute the optimal static portfolio in this extended asset space. The intuition is that a static choice among managed portfolios is equivalent to a dynamic strategy. We consider managed portfolios of two types: "conditional" and "timing" portfolios. Conditional portfolios are constructed along the lines of Hansen and Richard (1987). For each variable that affects the distribution of returns and for each basis asset, we include a portfolio that invests in the basis asset an amount proportional to the level of the conditioning variable. Timing portfolios invest in each basis asset for a single period and therefore mimic strategies that buy and sell the asset through time. We apply our method to a problem of dynamic asset allocation across stocks, bonds, and cash using the predictive ability of four conditioning variables
A simulation approach to dynamic portfolio choice with an application to learning about return predictability by Michael W Brandt( Book )
10 editions published in 2004 in English and held by 35 libraries worldwide
We present a simulation-based method for solving discrete-time portfolio choice problems involving non-standard preferences, a large number of assets with arbitrary return distribution, and, most importantly, a large number of state variables with potentially path-dependent or non-stationary dynamics. The method is flexible enough to accommodate intermediate consumption, portfolio constraints, parameter and model uncertainty, and learning. We first establish the properties of the method for the portfolio choice between a stock index and cash when the stock returns are either iid or predictable by the dividend yield. We then explore the problem of an investor who takes into account the predictability of returns but is uncertain about the parameters of the data generating process. The investor chooses the portfolio anticipating that future data realizations will contain useful information to learn about the true parameter values
Die Architektur des Klassizismus im Herzogtum Oldenburg und in den Fürstentümern Lübeck und Birkenfeld, 1785-1853 by Michael W Brandt( Book )
4 editions published in 2011 in German and English and held by 34 libraries worldwide
Parametric portfolio policies : exploiting characteristics in the cross section of equity returns by Michael W Brandt( Book )
10 editions published in 2004 in English and held by 34 libraries worldwide
"We propose a novel approach to optimizing portfolios with large numbers of assets. We model directly the portfolio weight in each asset as a function of the asset's characteristics. The coefficients of this function are found by optimizing the investor's average utility of the portfolio's return over the sample period. Our approach is computationally simple, easily modified and extended, produces sensible portfolio weights, and offers robust performance in and out of sample. In contrast, the traditional approach of first modeling the joint distribution of returns and then solving for the corresponding optimal portfolio weights is not only difficult to implement for a large number of assets but also yields notoriously noisy and unstable results. Our approach also provides a new test of the portfolio choice implications of equilibrium asset pricing models. We present an empirical implementation for the universe of all stocks in the CRSP-Compustat dataset, exploiting the size, value, and momentum anomalies"--National Bureau of Economic Research web site
Optimal decentralized investment management by Jules H. van Binsbergen( Book )
9 editions published in 2006 in English and held by 23 libraries worldwide
We study a decentralized investment problem in which a CIO employs multiple asset managers to implement and execute investment strategies in separate asset classes. The CIO allocates capital to the managers who, in turn, allocate these funds to the assets in their asset class. This two-step investment process causes several misalignments of objectives between the CIO and his managers and can lead to large utility costs on the part of the CIO. We focus on i) loss of diversification ii) different appetites for risk, iii) different investment horizons, and iv) the presence of liabilities. We derive an optimal unconditional linear performance benchmark and show that this benchmark can be used to better align incentives within the firm. The optimal benchmark substantially mitigates the utility costs of decentralized investment management. These costs can be further reduced when the CIO can screen asset managers on the basis of their risk appetites. Each manager's optimal level of risk aversion depends on the asset class he manages and can differ substantially from the CIO's level of risk aversion
Das Oldenburger Giebelhaus : Betrachtungen zur "Hundehütte" ( Book )
2 editions published in 1997 in German and held by 23 libraries worldwide
Resolving macroeconomic uncertainty in stock and bond markets by Alessandro Beber( Book )
9 editions published in 2006 in English and held by 23 libraries worldwide
"We establish an empirical link between the ex-ante uncertainty about macroeconomic fundamentals and the ex-post resolution of this uncertainty in financial markets. We measure macroeconomic uncertainty using prices of economic derivatives and relate this measure to changes in implied volatilities of stock and bond options when the economic data is released. We also examine the relationship between our measure of macroeconomic uncertainty and trading activity in stock and bond option markets before and after the announcements. Higher macroeconomic uncertainty is associated with greater reduction in implied volatilities. Higher macroeconomic uncertainty is also associated with increased volume in option markets after the release, consistent with market participants waiting to trade until economic uncertainty is resolved, and with decreased open interest in option markets after the release, consistent with market participants using financial options to hedge macroeconomic uncertainty. The empirical relationships are strongest for long-term bonds and weakest for non-cyclical stocks"--National Bureau of Economic Research web site
Flight to quality or flight to liquidity? : evidence from the Euro-area bond market by Alessandro Beber( Book )
10 editions published in 2006 in English and held by 21 libraries worldwide
Do bond investors demand credit quality or liquidity? The answer is both, but at different times and for different reasons. Using data on the Euro-area government bond market, which features a unique negative correlation between credit quality and liquidity across countries, we show that the bulk of sovereign yield spreads is explained by differences in credit quality, though liquidity plays a non-trivial role especially for low credit risk countries and during times of heightened market uncertainty. In contrast, the destination of large flows into the bond market is determined almost exclusively by liquidity. We conclude that credit quality matters for bond valuation but that, in times of market stress, investors chase liquidity, not credit quality
Simulated liklihood estimation of diffusions with an application to exchange rate dynamics in incomplete markets by Michael W Brandt( Book )
8 editions published in 2001 in English and held by 18 libraries worldwide
Abstract: We present an econometric method for estimating the parameters of a diffusion model from discretely sampled data. The estimator is transparent, adaptive, and inherits the asymptotic properties of the generally unattainable maximum likelihood estimator. We use this method to estimate a new continuous-time model of the Joint dynamics of interest rates in two countries and the exchange rate between the two currencies. The model allows financial markets to be incomplete and specifies the degree of incompleteness as a stochastic process. Our empirical results offer several new insights into the dynamics of exchange rates
Region Ostfriesland, Oldenburger Land by Monika van Lengen( Book )
1 edition published in 2000 in German and held by 10 libraries worldwide
Oldenburg : gestern und heute : eine Gegenüberstellung by Michael W Brandt( Book )
2 editions published in 1997 in German and held by 5 libraries worldwide
On the timing and pricing of dividends by Jules H. van Binsbergen( Book )
8 editions published in 2010 in English and held by 5 libraries worldwide
Abstract: We recover prices of dividend strips on the aggregate stock market using data from derivatives markets. The price of a k-year dividend strip is the present value of the dividend paid in k years. The value of the stock market is the sum of all dividend strip prices across maturities. We study the properties of strips and find that expected returns, Sharpe ratios, and volatilities on short-term strips are higher than on the aggregate stock market, while their CAPM betas are well below one. Short-term strip prices are more volatile than their realizations, leading to excess volatility and return predictability
What does equity sector orderflow tell us about the economy? by Alessandro Beber( Book )
7 editions published in 2010 in English and held by 5 libraries worldwide
Abstract: Investors rebalance their portfolios as their views about expected returns and risk change. We use empirical measures of portfolio rebalancing to back out investors' views, specifically their views about the state of the economy. We show that aggregate portfolio rebalancing across equity sectors is consistent with sector rotation, an investment strategy that exploits perceived differences in the relative performance of sectors at different stages of the business cycle. The empirical foot-print of sector rotation has predictive power for the evolution of the economy and future bond market returns, even after controlling for relative sector returns. Contrary to many theories of price formation, trading activity therefore contains information that is not entirely revealed by resulting relative price changes
Traditional film editing versus electronic nonlinear film editing : a comparison of feature films by Michael W Brandt( Archival Material )
2 editions published in 1994 in English and held by 3 libraries worldwide
Linear approximations and tests of conditional pricing models by Michael W Brandt( file )
1 edition published in 2006 in English and held by 0 libraries worldwide
We construct a simple reduced-form example of a conditional pricing model with modest intrinsic nonlinearity. The theoretical magnitude of the pricing errors (alphas) induced by the application of standard linear conditioning are derived as a direct consequence of an omitted variables bias. When the model is calibrated to either characteristics sorted or industry portfolios, we find that the alphas generated by approximation-induced specification error are economically large. A Monte Carlo analysis shows that finite-sample alphas are even larger. It also shows that the power to detect omitted nonlinear factors through tests based on estimated risk premiums can sometimes be quite low, even when the effect of misspecification on alphas is large
 
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Alternative Names
Brandt, Michael 1958-
Brandt, Michael Werner 1958-
Languages
English (146)
German (8)
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