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Two Paradigms and Nobel Prizes in Economics : A Contradiction or Coexistence?
Levy, Haim; De Giorgi, Enrico; Hens, Thorsten - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003
-Variance analysis and the Capital Asset Pricing Model (CAPM). In the year 2002, Kahneman won the Nobel Prize in Economics for the … development of Prospect Theory. Can these two apparently contradictory paradigms coexist? In deriving the CAPM, Sharpe, Lintner … wealth rather than total wealth contradicts EU theory. The subjective distortion of probabilities violates the CAPM …
Persistent link: https://www.econbiz.de/10005858578
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An Evolutionary Explanation of the Value Premium Puzzle
Hens, Thorsten; Schenk-Hoppé, Klaus Reiner; Woehrmann, … - Institut für Schweizerisches Bankwesen <Zürich> - 2006
corresponding regression line determined in our empirical study beats the security market line (SML) of the CAPM in the goodness of …
Persistent link: https://www.econbiz.de/10005858582
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Prospect Theory and the CAPM : A contradiction or coexistence?
Levy, Haim; De Giorgi, Enrico; Hens, Thorsten - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004
Under the assumption of normally distributed returns, we analyzewhether the Cumulative Prospect Theory of Tversky and Kahneman (1992)is consistent with the Capital Asset Pricing Model. We find that in everyfinancial market equilibrium the Security Market Line Theorem holds.However, under the...
Persistent link: https://www.econbiz.de/10005858756
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Asset Pricing, Habit Memory, and the Labor Market
Jaccard, Ivan - Institut für Schweizerisches Bankwesen <Zürich> - 2007
This study finds that a model with internal habit memory allowsto simultaneously explain a series of business cycle and asset pricing puzzles. Compared to the literature, the equity premium puzzle can be resolved in a model with endogenous labor, without giving rise to excessive risk free rate...
Persistent link: https://www.econbiz.de/10005858035
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Strategic Asset Allocation, Asset Price Dynamics, and the Business Cycle
Jaccard, Ivan - Institut für Schweizerisches Bankwesen <Zürich> - 2007
The main contribution of this work is to provide a dynamic general equilibrium model of asset allocation, allowing to reconcile economic theory with several puzzling contradictions recently pointed out in the literature: (i) the asset allocation puzzle, (ii) the observed time-variation in...
Persistent link: https://www.econbiz.de/10005858061
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On Consequences of State Dependent Preferences for the Pricing of Financial Assets
Danthine, Jean-Pierre; Donaldson, John B.; Giannikos, … - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002
This paper introduces state dependent utility into the standard Mehra and Prescott (1985) economy by allowing the representative agents coefficient of relative risk aversion to vary with the underlying economys growth rate. Existence of equilibrium is proved and its asymptotic properties...
Persistent link: https://www.econbiz.de/10005859325
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The Disposition Effect in the Lab
Vlcek, Martin; Wang, Mei - Institut für Schweizerisches Bankwesen <Zürich> - 2007
We conduct controlled experiments in order to analyze individual trading behavior. Our results suggest that investors measure their gains relative to their initial wealth, and that this reference point together with past stock price changes determine the portfolio choices. Subjects choose a...
Persistent link: https://www.econbiz.de/10005858051
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Asset Prices with Locally-Constrained Entropy Recursive Multiple Priors Utility
Sbuelz, Alessandro; Trojani, Fabio - Institut für Schweizerisches Bankwesen <Zürich> - 2007
Control problems with Recursive Multiple-Priors Utility (RMPU) are highly non-linear so that RMPU asset prices have been studied in very simple exchange economies only. We identify a continuous-time exchange equilibrium with Locally-Constrained-Entropy RMPU (LCE-RMPU) that is tractable even in...
Persistent link: https://www.econbiz.de/10005858066
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Ratchet vs Blase Investors and Asset Markets
St-Amour, Pascal - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004
This paper proposes a new wealth-dependent utility function for the inter-temporal consumption and portfolio problem, in which the subsistance (bliss) con-sumption level is a function of wealth. Ratchet effects obtain when higher wealth in-creases the subsistance consumption level; blas´...
Persistent link: https://www.econbiz.de/10005858307
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Correlation Risk and Optimal Portfolio Choice
Buraschi, Andrea; Porchia, Paolo; Trojani, Fabio - Institut für Schweizerisches Bankwesen <Zürich> - 2007
In this paper we solve an intertemporal portfolio problem with correlation risk, using a new approach for the simultaneous modeling of stochastic correlation and volatility. The solutions of the model are in closed form and include an optimal portfolio demand for hedging correlation risk. We...
Persistent link: https://www.econbiz.de/10005858523