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Strategic investment, industry concentration and the cross section of returns
Bustamante, Maria Cecilia - London School of Economics (LSE) - 2011
This paper provides an alternative real options framework to assess how firms' strategic interaction under imperfect competition a¤ects the industrial dynamics of investment, concentration, and expected returns. When firms have similar production technologies, the cross sectional variation in...
Persistent link: https://www.econbiz.de/10011071300
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Arbitrage and equilibrium with portofolio constraints.
Cornet, Bernard; Gopalan, Ramu - Centre d'Économie de la Sorbonne, Université Paris 1 … - 2009
back to Cass (1984, 2006) in the unconstrained case, we seek to isolate arbitrage-free asset prices that are aloso quasi … aggregate arbitrage-free asset prices, i.e., for which there is no arbitrage in the space of marketed portfolios. Our main …
Persistent link: https://www.econbiz.de/10008622058
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Impact of information cost and switching of trading strategies in an artificial stock market.
Liu, Yi-Fang; Zhang, Wei; Xu, Chao; Andersen, Jørgen … - Centre d'Économie de la Sorbonne, Université Paris 1 … - 2014
This paper studies the switching of trading strategies and its effect on the market volatility in a continuous double auction market. We describe the behavior when some uninformed agents, who we call switchers, decide whether or not to pay for information before they trade. By paying for the...
Persistent link: https://www.econbiz.de/10010762660
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Portfolio choice beyond the traditional approach
Penaranda, Francisco - London School of Economics (LSE) - 2007
This paper surveys asset allocation methods that extend the traditional approach. An important feature of the traditional approach is that measures the risk and return tradeoff in terms of mean and variance of final wealth. However, there are also other important features that are not always...
Persistent link: https://www.econbiz.de/10010745189
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The international diversification puzzle is not worse than you think
Julliard, Christian - London School of Economics (LSE) - 2002
This paper offers two main contributions. First, it shows how the Baxter and Jermann (1997) claim that, once we consider human capital risk, the international diversification puzzle is worse than we think, is based on an econometric misspecification rejected by the data. Second, it outlines how,...
Persistent link: https://www.econbiz.de/10010746135
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Rational asset pricing implications from realistic trading frictions
Zigrand, Jean-Pierre - London School of Economics (LSE) - 2002
it is shown that arbitrage opportunities occur which could not have occured in a standard model. A certain and precise … degree of informativeness of prices to the traders is lost because the decision making process becomes endogenously segmented … and decentralized within the same decision making entity (distinct "trading desks"). It is shown that, compared to the …
Persistent link: https://www.econbiz.de/10010746573
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Optimal expectations
Brunnermeier, Markus K.; Parker, Jonathan A. - London School of Economics (LSE) - 2002
the other hand, expectations that are biased towards optimism worsen decision making, leading to poorer realized outcomes …
Persistent link: https://www.econbiz.de/10010746723
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The Whys of the LOIS: Credit Skew and Funding Spread Volatility.
Crépey, Stéphane; Douady, Raphaël - Centre d'Économie de la Sorbonne, Université Paris 1 … - 2014
The 2007 subprime crisis has induced a persistent disconnection between the Libor derivative markets of different tenors and the OIS market. Commonly proposed explanations for the corresponding spreads are a combination of credit risk and liquidity risk. However in the literature the meaning of...
Persistent link: https://www.econbiz.de/10011123706
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Dynamic equilibrium with rare events and heterogeneous Epstein-Zin investors
Chabakauri, Georgy - London School of Economics (LSE) - 2015
We consider a general equilibrium Lucas (1978) economy with one consumption good and two heterogeneous Epstein-Zin investors. The output is subject to rare large drops or, more generally, can have non-lognormal distribution with higher cumulants. The heterogeneity in preferences generates excess...
Persistent link: https://www.econbiz.de/10011126596
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Understanding portfolio efficiency with conditioning information
Peñaranda, Francisco - London School of Economics (LSE) - 2009
Contrary to the classic framework of passive strategies, if investors exploit return predictability through active strategies then there is a tension between the mean-variance frontiers that drive empirical work and the mean-variance preferences that are used in finance theory. We show that...
Persistent link: https://www.econbiz.de/10011071262