Forecasting Firm Level Illiquid Asset Volatility using Time Series based Accounting Information An Empirical Modeling Approach

Abstract

These above words were the inspiration of my never ending quest of finding truth. My present thesis work is an outcome of my burning desire to know the ultimate truth. I hope I receive HIS constant blessings. newlineThe thesis presented here is a kind of empirical justification and perhaps first of its kind in Indian management literature because it puts another major contribution to the most debatable and intellectually enduring subject of Mis-pricing of assets. This topic was a constant area of collective discussions in the forums, conferences and seminars particularly limited to economists, market traders, newlineinvestors and academicians studying the same subject. newlineThe thesis explores the effect of incomplete market information in form utilising the two latent pricing models namely Model (others) and Model (CMP). These empirical models are based on idiosyncratic firm level published information to derive human capital (as an alternative to Illiquid asset)with methodological context to generate meaningful implications in the realm of alternative asset pricing volatility, discretionary capital buffers and alternative credit rating migrationframework. The main focus is on building a robust forecasting model for ascertaining risk emanating from human capital latent prices as specified in detail in the model process. The main striking feature to is to signal incomplete market phenomena in case the volatility derived from two different latent human capital pricing models differ significantly. A single factor model approach was adopted on low-frequency (annual) financial information for the same purposes. newlineFinally, it is worth a mention that the entire thesis was focussed on methodological context and brought some meaningful dimension to the aspect of mispricing, incomplete markets and their relationships with illiquid assets like human capital risks. The highlight of the paper was presented in two parts, at one part the balance sheet value-at-risk exposures were determined and explained emerging from the empirical model ..