resulting volatility can induce risk-averse transactors who face transaction costs to desert these markets altogether. Thus … thinness and the consequent price volatility may become joint self-perpetuating features of an equity market, whatever the … volatility of asset fundamentals. If, however, appropriate incentive schemes are adopted to encourage entry of additional …

of stock prices as predictors of future dividends. This paper analyses the relationship between market size and risk as …

commensurate with their risk aversion; more risk-averse individuals pick lower-volatility stocks. The investors' portfolio …The preferred risk habitat hypothesis, introduced here, is that individual investors select stocks with volatilities … consistent with the predictions of the hypothesis: the portfolios contain highly similar stocks in terms of volatility, when …

both create and share the risk associated with exchange rate volatility. In such circumstances, monetary policy can be used … of noise traders alters the composition of the market and generates excess exchange rate volatility, since noise traders … to lower exchange rate volatility without altering macroeconomic fundamentals. …

related to volatility, (iv) is subject to 'flight to quality', and (v) comoves with the market, and it provides new testable …

management. Evaluation of volatility models is then considered and a simple Value-at-Risk (VaR) diagnostic test is proposed for …This paper considers the problem of model uncertainty in the case of multi-asset volatility models and discusses the … use of model averaging techniques as a way of dealing with the risk of inadvertently using false models in portfolio …

future volatility and as a result estimate Value-at-Risk (VaR) several days ahead and compare it to the RiskMetricsTM (1996 … augmented GARCH process of Duan (1997). The Lévy flight includes a method for scaling up a single-day volatility to a multi …-day volatility, precisely a ?-root-of-time rule, where ? is the characteristic parameter of the process. We use this rule to forecast …

type of models often leads to too extreme VaR-estimates, whereas the latter type underestimates the risk in case of extreme … in the reported VaR. We make this uncertainty in the VaR explicit by means of simulation. Our empirical results suggest …

Portfolio theory must address the fact that, in reality, portfolio managers are evaluated relative to a benchmark, and … therefore adopt risk management practices to account for the benchmark performance. We capture this risk management … practice. In a dynamic setting, we demonstrate how a risk averse portfolio manager optimally under- or overperforms a target …