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A robust approach to risk aversion
Bommier, Antoine; Le Grand, François - 2013
We investigate whether the set of Kreps and Porteus (1978) preferences include classes of preferences that are stationary, monotonic and well-ordered in terms of risk aversion. We prove that the class of preferences introduced by Hansen and Sargent (1995) in their robustness analysis is the only...
Persistent link: https://www.econbiz.de/10009721838
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Risk aversion in the large and in the small
Haug, Jørgen; Hens, Thorsten; Wöhrmann, Peter - 2011
Estimates of agents' risk aversion differ between market studies and experimental studies. We demonstrate that the estimates can be reconciled through consistent treatment of agents' tendency for narrow framing, regarding integration of background wealth as well as across risky outcomes: Risk...
Persistent link: https://www.econbiz.de/10009295788
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The loss aversion, narrow framing approach to the equity premium puzzle
Barberis, Nicholas; Huang, Ming - 2006
Persistent link: https://www.econbiz.de/10003355176
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Risk based explanations of the equity premium
Donaldson, John B.; Mehra, Rajnish - 2007
This essay reviews the family of models that seek to provide aggregate risk based explanations for the empirically observed equity premium. Theories based on non-expected utility preference structures, limited financial market participation, model uncertainty and the small probability of...
Persistent link: https://www.econbiz.de/10003500061
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The Resolution of Long-Run Risk
Pidkuyko, Myroslav - 2019
Long-run risk models, a cornerstone in the macro-finance literature for their ability to capture key asset price phenomena, are known to entail implausibly high levels of timing and risk premia. Our paper resolves this puzzle by considering consumption of durable goods in addition to that of...
Persistent link: https://www.econbiz.de/10012888849
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How Much Would You Pay to Resolve Volatility Risk in Agricultural Commodity Markets?
Yan, Lei - 2019
This article investigates the pricing of volatility risk in agricultural commodity markets. We show theoretically that the cost of bearing volatility risk can be measured using returns to delta-neutral straddles. Using a sample of options for five commodities (corn, soybeans, Chicago wheat, live...
Persistent link: https://www.econbiz.de/10012889824
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Ambiguity, Long-Run Risks, and Asset Prices
Wei, Bin - 2019
We generalize the long-run risks (LRR) model in Bansal and Yaron (2004) by incorporating the recursive smooth ambiguity aversion preferences of Klibanoff, Marinacci, and Mukerji (2005, 2009) and time-varying ambiguity. Relative to the Bansal-Yaron model, the generalized LRR model remains...
Persistent link: https://www.econbiz.de/10012896734
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Feature-Selection Risk
Chinco, Alex - 2015
Companies have overlapping exposures to many different features that might plausibly affect their returns, like whether they're involved in a crowded trade, whether they're mentioned in an M&A rumor, or whether their supplier recently missed an earnings forecast. Yet, at any point in time, only...
Persistent link: https://www.econbiz.de/10013032176
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Risk, Uncertainty, and 'Super-Risk'
Bermudez, Jose - 2015
sources. Risk is a pervasive feature of law and public policy. Decision-making in these domains often takes place in the … employs the basic tools of decision theory (probability and utility) to measure the likelihood as well as the costs and … of risk that has been systematically ignored. We call it “super-risk.” Super-risk occurs when, at the time of decision …
Persistent link: https://www.econbiz.de/10013020283