Financial intermediaries and the cross-section of asset returns

• Autores: Tobias Adrian, Erkko Etula, Tyler Muir
• Localización: The Journal of finance, ISSN 0022-1082, Vol. 69, Nº 6, 2014, págs. 2557-2596
• Idioma: inglés
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• Resumen

  • Financial intermediaries trade frequently in many markets using sophisticated models. Their marginal value of wealth should therefore provide a more informative stochastic discount factor (SDF) than that of a representative consumer. Guided by theory, we use shocks to the leverage of securities broker-dealers to construct an intermediary SDF. Intuitively, deteriorating funding conditions are associated with deleveraging and high marginal value of wealth. Our single-factor model prices size, book-to-market, momentum, and bond portfolios with an R2 of 77% and an average annual pricing error of 1%�performing as well as standard multifactor benchmarks designed to price these assets.