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Calvet, Laurent E.

Overview
Works: 38 works in 156 publications in 2 languages and 1,049 library holdings
Roles: Redactor
Classifications: HB141, 332.01514742
Publication Timeline
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Publications about Laurent E Calvet
Publications by Laurent E Calvet
Most widely held works by Laurent E Calvet
Multifractal volatility theory, forecasting, and pricing by Laurent E Calvet( file )
18 editions published in 2008 in English and held by 393 libraries worldwide
Calvet and Fisher present a powerful, new technique for volatility forecasting that draws on insights from the use of multifractals in the natural sciences and mathematics and provides a unified treatment of the use of multifractal techniques in finance. A large existing literature (e.g., Engle, 1982; Rossi, 1995) models volatility as an average of past shocks, possibly with a noise component. This approach often has difficulty capturing sharp discontinuities and large changes in financial volatility. Their research has shown the advantages of modelling volatility as subject to abrupt regime changes of heterogeneous durations. Using the intuition that some economic phenomena are long-lasting while others are more transient, they permit regimes to have varying degrees of persistence. By drawing on insights from the use of multifractals in the natural sciences and mathematics, they show how to construct high-dimensional regime-switching models that are easy to estimate, and substantially outperform some of the best traditional forecasting models such as GARCH. The goal of their book is to popularize the approach by presenting these exciting new developments to a wider audience. They emphasize both theoretical and empirical applications, beginning with a style that is easily accessible and intuitive in early chapters, and extending to the most rigorous continuous-time and equilibrium pricing formulations in final chapters. Presents a powerful new technique for forecasting volatility Leads the reader intuitively from existing volatility techniques to the frontier of research in this field by top scholars at major universities. The first comprehensive book on multifractal techniques in finance, a cutting-edge field of research
Regime-switching and the estimation of multifractal processes by Laurent E Calvet( Book )
13 editions published in 2003 in English and held by 71 libraries worldwide
We propose a discrete-time stochastic volatility model in which regime switching serves three purposes. First, changes in regimes capture low frequency variations, which is their traditional role. Second, they specify intermediate frequency dynamics that are usually assigned to smooth autoregressive processes. Finally, high frequency switches generate substantial outliers. Thus, a single mechanism captures three important features of the data that are typically addressed as distinct phenomena in the literature. Maximum likelihood estimation is developed and shown to perform well in finite sample. We estimate on exchange rate data a version of the process with four parameters and more than a thousand states. The estimated model compares favorably to earlier specifications both in- and out-of-sample. Multifractal forecasts slightly improve on GARCH(1,1) at daily and weekly intervals, and provide considerable gains in accuracy at horizons of 10 to 50 days
Idiosyncratic production risk, growth and the business cycle by Marios Angeletos( Book )
10 editions published between 2002 and 2003 in English and held by 70 libraries worldwide
We introduce a neoclassical growth economy with idiosyncratic production risk and incomplete markets. The general equilibrium is characterized in closed form. Uninsurable production shocks introduce a risk premium on private equity and typically result in a lower steady-state level of capital than under complete markets. In the presence of such risks, the anticipation of low investment and high interest rates in the future feeds back into a high risk premium and low investment in the present. The endogenous countercyclicality of the risk premium generates a macroeconomic complementarity between future and current investment, which slows down convergence and amplifies the magnitude and persistence of the business cycle. These results - in sharp contrast with Aiyagari (1994) and Krusell and Smith (1998) - highlight that idiosyncratic production or capital-income risk can have significant adverse effects on capital accumulation and aggregate volatility. Keywords: Entrepreneurial Risk, Investment, Growth, Fluctuations, Precautionary Savings, Capital income
Financial innovation, market participation and asset prices by Laurent E Calvet( Book )
11 editions published between 2001 and 2003 in English and held by 69 libraries worldwide
This paper investigates the pricing effects of financial innovation in an economy with endogenous participation and heterogeneous income risks. The introduction of non-redundant assets endogenously modifies the participation set, reduces the covariance between dividends and participants' consumption and thus leads to lower risk premia. In multisector economies, financial innovation spreads across markets through the diversified portfolio of new entrants, and has rich effects on the cross-section of expected returns. The price changes can also lead some investors to leave the markets and give rise to non-degenerate forms of participation turnover. The model is consistent with several features of financial markets over the past few decades: substantial innovation; higher participation; significant turnover in investor composition; improved risk management practices; a slight increase in interest rates; and a reduction in risk premia
Incomplete market dynamics in a neoclassical production economy by Marios Angeletos( Book )
10 editions published between 2004 and 2005 in English and held by 66 libraries worldwide
"We investigate a neoclassical economy with heterogeneous agents, convex technologies and idiosyncratic production risk. Combined with precautionary savings, investment risk generates rich effects that do not arise in the presence of pure endowment risk. Under a finite horizon, multiple growth paths and endogenous fluctuations can exist even when agents are very patient. In infinite-horizon economies, multiple steady states may arise from the endogeneity of risktaking and interest rates instead of the usual wealth effects. Depending on the economy's parameters, the local dynamics around a steady state are locally unique, totally unstable or locally undetermined, and the equilibrium path can be attracted to a limit cycle. The model generates closed-form expressions for the equilibrium dynamics and easily extends to a variety of environments, including heterogeneous capital types and multiple sectors"--National Bureau of Economic Research web site
Down or out assessing the welfare costs of household investment mistakes by Laurent E Calvet( file )
16 editions published in 2006 in English and held by 63 libraries worldwide
This paper investigates the efficiency of household investment decisions in a unique dataset containing the disaggregated wealth and income of the entire population of Sweden. The analysis focuses on two main sources of inefficiency in the financial portfolio: underdiversification of risky assets ("down") and nonparticipation in risky asset markets ("out"). We find that while a few households are very poorly diversified, the cost of diversification mistakes is quite modest for most of the population. For instance, a majority of participating Swedish households are sufficiently diversified internationally to outperform the Sharpe ratio of their domestic stock market. We document that households with greater financial sophistication tend to invest more efficiently but also more aggressively, so the welfare cost of portfolio inefficiency tends to be greater for these households. The welfare cost of nonparticipation is smaller by almost one half when we take account of the fact that nonparticipants would be unlikely to invest efficiently if they participated in risky asset markets
Multifrequency news and stock returns by Laurent E Calvet( Book )
6 editions published in 2005 in English and held by 61 libraries worldwide
"Recent research documents that aggregate stock prices are driven by shocks with persistence levels ranging from daily intervals to several decades. Building on these insights, we introduce a parsimonious equilibrium model in which regime-shifts of heterogeneous durations affect the volatility of dividend news. We estimate tightly parameterized specifications with up to 256 discrete states on daily U.S. equity returns. The multifrequency equilibrium has significantly higher likelihood than the classic Campbell and Hentschel (1992) specification, while generating volatility feedback effects 6 to 12 times larger. We show in an extension that Bayesian learning about stochastic volatility is faster for bad states than good states, providing a novel source of endogenous skewness that complements the "uncertainty" channel considered in previous literature (e.g., Veronesi, 1999). Furthermore, signal precision induces a tradeoff between skewness and kurtosis, and economies with intermediate investor information best match the data"--National Bureau of Economic Research web site
Multifrequency jump-diffusions an equilibrium approach by Laurent E Calvet( file )
5 editions published in 2006 in English and held by 48 libraries worldwide
This paper proposes that equilibrium valuation is a powerful method to generate endogenous jumps in asset prices, which provides a structural alternative to traditional reduced-form specifications with exogenous discontinuities. We specify an economy with continuous consumption and dividend paths, in which endogenous price jumps originate from the market impact of regime-switches in the drifts and volatilities of fundamentals. We parsimoniously incorporate shocks of heterogeneous durations in consumption and dividends while keeping constant the number of parameters. Equilibrium valuation creates an endogenous relation between a shock's persistence and the magnitude of the induced price jump. As the number of frequencies driving fundamentals goes to infinity, the price process converges to a novel stochastic process, which we call a multifractal jump-diffusion
Volatility comovement a multifrequency approach by Laurent E Calvet( file )
5 editions published in 2004 in English and held by 41 libraries worldwide
We implement a multifrequency volatility decomposition of three exchange rates and show that components with similar durations are strongly correlated across series. This motivates a bivariate extension of the Markov-Switching Multifractal (MSM) introduced in Calvet and Fisher (2001, 2004). Bivariate MSM is a stochastic volatility model with a closed-form likelihood. Estimation can proceed by ML for state spaces of moderate size, and by simulated likelihood via a particle filter in high-dimensional cases. We estimate the model and confirm its main assumptions in likelihood ratio tests. Bivariate MSM compares favorably to a standard multivariate GARCH both in- and out-of-sample. We extend the model to multivariate settings with a potentially large number of assets by proposing a parsimonious multifrequency factor structure
Fight or flight? portfolio rebalancing by individual investors by Laurent E Calvet( file )
6 editions published in 2008 in English and held by 41 libraries worldwide
This paper investigates the dynamics of individual portfolios in a unique dataset containing the disaggregated wealth of all households in Sweden. Between 1999 and 2002, we observe little aggregate rebalancing in the financial portfolio of participants. These patterns conceal strong household-level evidence of active rebalancing, which on average offsets about one half of idiosyncratic passive variations in the risky asset share. Wealthy, educated investors with better diversified portfolios tend to rebalance more actively. We find some evidence that households rebalance towards a higher risky share as they become richer. We also study the decisions to trade individual assets. Households are more likely to fully sell directly held stocks if those stocks have performed well, and more likely to exit direct stockholding if their stock portfolios have performed well; but these relationships are much weaker for mutual funds, a pattern which is consistent with previous research on the disposition effect among direct stockholders and performance sensitivity among mutual fund investors. When households continue to hold individual assets, however, they rebalance both stocks and mutual funds to offset about one sixth of the passive variations in individual asset shares. Households rebalance primarily by adjusting purchases of risky assets if their risky portfolios have performed poorly, and by adjusting both fund purchases and full sales of stocks if their risky portfolios have performed well. Finally, the tendency for households to fully sell winning stocks is weaker for wealthy investors with diversified portfolios of individual stocks
Twin picks disentangling the determinants of risk-taking in household portfolios by Laurent E Calvet( Computer File )
8 editions published between 2010 and 2011 in English and held by 40 libraries worldwide
This paper investigates the determinants of financial risk-taking in a panel containing the asset holdings of Swedish twins. We measure the impact of a broad set of demographic, financial, and portfolio characteristics, and use yearly twin pair fixed effects to control for genes and shared background. We report a strong positive relation between risky asset market participation and financial wealth. Among participants, the average financial wealth elasticity of the risky share is significantly positive and estimated at 22%, which suggests that the average individual investor has decreasing relative risk aversion. Furthermore, the financial wealth elasticity of the risky share itself is heterogeneous across investors and varies strongly with characteristics. The elasticity decreases with financial wealth and human capital, and increases with habit, real estate wealth and household size. As a consequence, the elasticity of the aggregate demand for risky assets to exogenous wealth shocks is close to, but does not coincide with, the elasticity of a representative investor with constant relative risk aversion. We confirm the robustness of our results by running time-differenced instrumental variable regressions, and by controlling for zygosity, lifestyle, mental and physical health, the intensity of communication between twins, and measures of social interactions
Measuring the financial sophistication of households by Laurent E Calvet( Computer File )
7 editions published in 2009 in English and held by 39 libraries worldwide
This paper constructs an index of financial sophistication that, in comprehensive data on Swedish households, best explains a set of three investment mistakes: underdiversification, risky share inertia, and the tendency to sell winning stocks and hold losing stocks (the disposition effect). The index of financial sophistication increases strongly with financial wealth and household size, and to a lesser extent with education and proxies for financial experience. The index is strongly positively correlated with the share of risky assets held by a household
Incomplete markets, growth, and the business cycle by Marios Angeletos( Book )
6 editions published between 2000 and 2001 in English and held by 7 libraries worldwide
We introduce a Ramsey growth model with incomplete markets, decentralized production, and idiosyncratic technological risk. The combination of uninsurable shocks with the precautionary motive can slow down capital accumulation or give rise to persistent fluctuations even when agents are very patient and technology is strictly convex. The model generates closed-form expressions for the equilibrium dynamics under a finite or infinite horizon. Multiple steady states and poverty traps can arise from the endogeneity of the interest rate instead of the usual wealth effect. Depending on the economy's parameters, the local dynamics around a steady state are locally unique, totally unstable or locally undetermined, and the equilibrium path can be attracted to a limit cycle. In calibrated examples, financial incompleteness substantially slows down convergence to the steady state and thus increases the persistence of aggregate shocks
Evaluación de las necesidades de rehabilitación by Jordi Busquets( Book )
3 editions published in 1985 in Spanish and held by 7 libraries worldwide
State-observation sampling and the econometrics of learning models by Laurent E Calvet( Book )
2 editions published in 2011 in English and held by 4 libraries worldwide
Behavioral heterogeneity and the income effect by Laurent E Calvet( Book )
2 editions published in 2000 in English and held by 3 libraries worldwide
Incomplete markets and volatility by Laurent E Calvet( Book )
3 editions published in 1999 in English and held by 3 libraries worldwide
Financial innovation, market participation and asset prices ( Computer File )
2 editions published in 2001 in English and held by 2 libraries worldwide
This paper proposes that the introduction of non-redundant assets can endogenously modify trader participation in financial markets, which can lead to a lower market premium and a higher interest rate. We demonstrate this mechanism in a tractable exchange economy with endogenous participation. Investors receive heterogeneous random incomes determined by a finite number of macroeconomic factors. They can freely borrow and lend, but must pay a fixed entry cost to invest in risky assets. Security prices and the participation structure are jointly determined in equilibrium. The model reconciles a number of features that have characterized financial markets in the past three decades: substantial financial innovation; a sharp increase in investor participation; improved risk management practices; an increase in interest rates; and a reduction in the risk premium. -- Endogenous Participation ; Epstein-Zin Utility ; Financial Innovation ; Incomplete Markets ; Multiple Risk Factors ; Risk Premium ; Spanning
Idiosyncratic production risk, growth, and the business cycle ( Computer File )
2 editions published in 2002 in English and held by 2 libraries worldwide
Essays in the economics of heterogeneity by Laurent E Calvet( Book )
2 editions published in 1998 in English and held by 2 libraries worldwide
 
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Alternative Names
Calvet, L. E. 1969-
Calvet, Laurent
Calvet, Laurent 1969-
Calvet, Laurent E.
Calvet, Laurent-Emmanuel
Calvet, Laurent-Emmanuel 1969-
Languages
English (134)
Spanish (3)
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