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Principal portfolios
Kelly, Bryan T.; Malamud, Semyon; Pedersen, Lasse Heje - 2020 - This version: June 8, 2020
We propose a new asset-pricing framework in which all securities' signals are used to predict each individual return. While the literature focuses on each security's own- signal predictability, assuming an equal strength across securities, our framework is flexible and includes...
Persistent link: https://www.econbiz.de/10012271188
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A diagnostic criterion for approximate factor structure
Gagliardini, Patrick; Ossola, Elisa; Scaillet, Olivier - 2016 - This version: July 2016
We build a simple diagnostic criterion for approximate factor structure in large panel datasets. Given observable factors, the criterion checks whether the errors are weakly cross-sectionally correlated or share at least one unobservable common factor (interactive effects). A general version...
Persistent link: https://www.econbiz.de/10011518993
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Regression-Based Estimation of Dynamic Asset Pricing Models
Adrian, Tobias - 2014
We propose regression-based estimators for beta representations of dynamic asset pricing models with an affine pricing kernel specification. We allow for state variables that are cross-sectional pricing factors, forecasting variables for the price of risk, and factors that are both. The...
Persistent link: https://www.econbiz.de/10013068063
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The Equity Risk Premium : A Review of Models
Duarte, Fernando - 2015
We estimate the equity risk premium (ERP) by combining information from twenty models. The ERP in 2012 and 2013 reached …
Persistent link: https://www.econbiz.de/10013017426
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Asset allocation and risk taking under different interest rate regimes
Hermans, Lieven; Kostka, Thomas; Vassallo, Danilo - 2023
We study the effects of low short-term interest rates on the optimal portfolio allocation in Markowitz portfolios and Risk parity portfolios. We propose a measure of Portfolio Instability, gauging the amount of optimal portfolio shifts needed to respond to exogenous shocks to the expected risk...
Persistent link: https://www.econbiz.de/10014278642
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Cognitive biases, ambiguity aversion and asset pricing in financial markets
Asparouhova, Elena; Bossaerts, Peter L.; Eguia, Jon; … - 2010 - This version: March 2010
with those under asymmetric information, and present experimental evidence in favor of our theory. The Efficient Markets … Hypothesis and its formal foundation, the Rational Expectations Equilibrium, predict that asymmetric information is irrelevant … because prices correctly aggregate all available information. We argue here that asymmetric reasoning is fundamentally …
Persistent link: https://www.econbiz.de/10003970453
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Is the price kernel monotone?
Barone-Adesi, Giovanni; Dall'O, Hakim - 2010
We provide a new method to derive the state price density per unit probability based on option prices and GARCH model. We derive the risk neutral distribution using the result in Breeden and Litzenberger (1978) and the historical density adapting the GARCH model of Barone-Adesi, Engle, and...
Persistent link: https://www.econbiz.de/10003973040
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Redistribution of return inequality
Schulz, Karl - 2021
. The leading example is a financial market, where the rich acquire more financial information than the poor. Contrary to …
Persistent link: https://www.econbiz.de/10012499593
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Level shifts in beta, spurious abnormal returns and the TARP announcement
Phin, Andrew; Prono, Todd; Reeves, Jonathan J.; Saxena, … - 2018
Using high frequency data, we develop an event study method to test for level shifts in beta and measure abnormal returns for events that produce such level shifts. Using this method, we estimate abnormal returns for the Troubled Asset Relief Program (TARP) announcement and find that its...
Persistent link: https://www.econbiz.de/10012016622
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Testing market efficiency with the pricing kernel
Barone-Adesi, Giovanni; Sala, Carlo - 2019
Market efficiency and the pricing kernel are closely related. A non-monotonic decreasing pricing kernel implies the existence of a trading strategy in contingent claims that stochastically dominates a direct investment in the market. Moreover, a market is assumed to be efficient only if no...
Persistent link: https://www.econbiz.de/10012179592