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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

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

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

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

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

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

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

How integrated are corporate bond and stock markets?

Sandulescu, Mirela - 2020

I study the degree of market integration between U.S. corporate bonds and stocks of their issuers. I document that trading costs and short-selling constraints, which are often imposed on market participants, regularize optimal Sharpe ratio portfolios. These novel trading frictions are consistent...

Persistent link: https://www.econbiz.de/10012181292

Risk & returns around FOMC press conferences : a novel perspective from computer vision

Marchal, Alexis - 2021

recent deep learning algorithms from computer vision. This alternative data provides new information on nonverbal … certain videos contain valuable information for the study of financial markets …

Persistent link: https://www.econbiz.de/10012487767

Spanning analysis of stock market anomalies under prospect stochastic dominance

Arvanitis, Stelios; Scaillet, Olivier; Topaloglou, Nikolas - 2020 - This version: April 2020

We develop and implement methods for determining whether introducing new securities or relaxing investment constraints improves the investment opportunity set for prospect investors. We formulate a new testing procedure for prospect spanning for two nested portfolio sets based on subsampling and...

Persistent link: https://www.econbiz.de/10012219063