This paper investigates how the nature of risk changes as investment horizon lengthens, and what it means for investors. Accumulated wealth is analyzed in terms of four drivers: expected return, cash flow innovations, discount rate innovations, and reinvestment rates. This perspective highlights...

We infer which risk model investors use by looking at their capital allocation decisions. We find that investors adjust for risk using the beta of the Capital Asset Pricing Model (CAPM). Extensions to the CAPM perform poorly, implying that they do not help explain how investors measure risk

Climate change is happening fast and may have a large impact on investment values. The growing debate about fossil fuel divestment is a signal that investors are slowly waking up to this threat, but long-term investors must do much more if they are to avoid material damage to the value of their...

As society looks increasingly at investors to take responsibility for events occurring at investee companies, corporate misbehaviour may spill over and damage the investor's reputation. In this paper, we explore the consequences this phenomenon might have for traditional portfolio construction...

The disposition effect occurs when investors hold unrealized loss assets for too long and sell unrealized profit assets too quickly. However, some studies argue that investors tend to be risk-averse in the area of unrealized capital losses. We confirm that these two views of the disposition...

Although financial literature presents ambiguous evidence about the predicting value of fundamental and technical variables in stock markets, we find that evolving trading models based on fundamental variables substantially reduce the risk of investing in stocks. This reduction is so generous...

Investors utility has been mathematically modeled at 1738 by Daniel Bernoulli as an attempt to capture investors preferences to lottery outcomes. Ever since the analysis of decision making under uncertainty has again become a major focus of interest. Kahneman and Tversky in 1979 suggested a more...

Dramatic trading in GameStop and other “meme stocks” has reignited debates about how efficient the stock market is, its purposes, and whose interests it should serve. Although understanding meme trading and retail trading is critical to evaluating responses to these recent trading episodes,...

The risk conscious investor is defined as the maximizer of a conservative valuation or dynamically a nonlinear expectation. Both the static and dynamic problems are addressed using distortions of tail probabilities or distortions of tail measures. The multivariate static problem is solved in the...