Papers by Andrea Yinjia Lu
The Review of Asset Pricing Studies, 2018
We construct a traded funding liquidity measure from stock returns. Guided by a model, we extract... more We construct a traded funding liquidity measure from stock returns. Guided by a model, we extract the measure as the return spread between two beta-neutral portfolios constructed using stocks with high and low margins, to control for their sensitivity to the aggregate funding shocks. Our measure of funding liquidity is correlated with other funding liquidity proxies. It delivers a positive risk premium that cannot be explained by existing risk factors. A model augmented by our funding liquidity measure has superior pricing performance for various portfolios. Despite evident comovement, this measure contains additional information that is not subsumed by market liquidity. Received March 29, 2017; accepted August 8, 2018 by Editor Wayne Ferson.
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Motu Working Paper, 2010
In this paper, we introduce an electricity market model and use it to explore the effect of clima... more In this paper, we introduce an electricity market model and use it to explore the effect of climate change on electricity output and prices. It is calibrated to the New Zealand Electricity Market, and includes multiple generation fuels, uncertain fuel availability, and storage options. The model is formulated in continuous time, which mimics the many short trading periods that are common to electricity spot markets, while properly incorporating forward-looking generation decision making. Specifically, it is used to estimate the effects of changes that may arise in characteristics of fuels -water and gas- as a consequence of climate change and climate change policies. The model does this under the polar cases of a competitive market structure and monopoly. There are three key findings from the results. First, the results illustrate the importance of allowing for volatility and including management of storage in electricity market models. Second, they suggest that reductions in averag...
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Time Varying Returns, 2015
Although it may be difficult for households to instantaneously adjust their stock of durable good... more Although it may be difficult for households to instantaneously adjust their stock of durable goods, they have much more latitude in adjusting the service flow from that stock. In contrast to past studies that assume service flow to be a constant fraction of the stock, we model the utilization of the stock of durable goods to be time-varying. We propose an innovative measure of the unobserved usage of durable goods from carbon dioxide emissions. Emissions provide a convenient aggregation of energy consumption that has become an important complementary input for durable goods consumption in recent decades. We find that the time-varying utilization of durable goods is a valid pricing factor. Our model exhibits a stronger cross-sectional pricing power than the CAPM and several consumption-based capital asset pricing models (CCAPMs), including Yogo's (2006) durable good model. Finally, our model mitigates the joint risk premium and implied risk-free rate puzzle.
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SSRN Electronic Journal, 2000
ABSTRACT In this paper we introduce a model of an electricity market and use it to explore the ef... more ABSTRACT In this paper we introduce a model of an electricity market and use it to explore the effect of climate change on electricity prices and output. It has multiple generation fuels, uncertain fuel availability, and storage options. The model is formulated in continuous time, which mimics the many short trading periods common to electricity spot markets. It properly incorporates forward-looking generation decision making. It is calibrated to the New Zealand Electricity Market and is used to estimate the effects of changes that may arise in characteristics of fuels – water and gas – as a consequence of climate change and climate change policies. It does so under the polar cases of a competitive market structure and monopoly. The results illustrate the importance of allowing for volatility and including management of storage in electricity market models. They suggest that reductions in average hydro fuel availability will reduce welfare significantly, that increases in the volatility of hydro fuel availability will also affect welfare, but to a very small extent, and that the value of reservoir expansion is sensitive to the distribution of hydro fuel availability. The effects of a carbon tax are reported.
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SSRN Electronic Journal, 2000
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SSRN Electronic Journal, 2000
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SSRN Electronic Journal, 2000
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SSRN Electronic Journal, 2000
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Energy Economics, 2013
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This report has been produced by the New Zealand Institute for the Study of Competition and Regul... more This report has been produced by the New Zealand Institute for the Study of Competition and Regulation for The Ministry of Agriculture and Forestry. All copyright is the property of the Crown and any unauthorised publication, reproduction, or adaptation of this report is strictly ...
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Papers by Andrea Yinjia Lu