Asset pricing

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

  Staff 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.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets JEL Code(s): E, E5, E58, G, G1, G14
• February 23, 2012

  Medium-Term Fluctuations in Canadian House Prices

  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.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Asset pricing, Econometric and statistical methods, Market structure and pricing JEL Code(s): R, R2, R21, R3, R31

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

  Staff 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.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Exchange rates, Interest rates JEL Code(s): E, E4, E43, F, F3, F31, G, G1, G12, G15

• Fooled by Search: Housing Prices, Turnover and Bubbles

  Staff 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.’

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Business fluctuations and cycles JEL Code(s): E, E3, R, R2, R21