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Model Combination and Stock Return Predictability

Hagmann, Matthias; Loebb, Joachim - Institut für Schweizerisches Bankwesen <Zürich> - 2006

Bayesian Model Averaging (BMA) has recently been discussed in the financial literature as an effective way to account for model uncertainty. In this paper we compare BMA to a new model uncertainty framework introduced by Yang (2004), called Aggregate Forecasting Through Exponential Reweighting,...

Persistent link: https://www.econbiz.de/10005858532

The impact of heterogeneous beliefs on trading volume

Bauer, Wolfgang - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

This paper analyzes the effects that uncertainty about economic fundamentalshas on aggregate trading volume. First, the trading volume of an investor facinga standard consumption portfolio choice problem is derived. It is found that if theparameters describing the investment opportunity set...

Persistent link: https://www.econbiz.de/10005857971

The Disposition Effect in the Lab

Vlcek, Martin; Wang, Mei - Institut für Schweizerisches Bankwesen <Zürich> - 2007

rebalancing, prospect theory with a ﬁxed reference point, or the justiﬁcation hypothesis explain the disposition effect. …

Persistent link: https://www.econbiz.de/10005858051

Strategic Asset Allocation, Asset Price Dynamics, and the Business Cycle

Jaccard, Ivan - Institut für Schweizerisches Bankwesen <Zürich> - 2007

reconcile economic theory with several puzzling contradictions recently pointed out in the literature: (i) the asset allocation …

Persistent link: https://www.econbiz.de/10005858061

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

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

The Leverage Effect without Leverage: An Experimental Study

Hens, Thorsten; Steude, Sven C. - Institut für Schweizerisches Bankwesen <Zürich> - 2006

Experimental stock markets are used to add some more evidence that Blacks (1976) leverage effect in financial markets does not necessarily stem from the financial leverage of the firm. We surprisingly find a large number of markets in which the leverage effect is observed although the underlying...

Persistent link: https://www.econbiz.de/10005858378

Expected Life-Time Utility and Hedging Demands In a Partially Observable Economy

Lundtofte, Frederik - Institut für Schweizerisches Bankwesen <Zürich> - 2007

This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investors expected life-time utility, and analyze his hedging demands for intertemporal changes...

Persistent link: https://www.econbiz.de/10005858506

Endogenous Acquisition of Information and The Equity Home Bias

Lundtofte, Frederik - Institut für Schweizerisches Bankwesen <Zürich> - 2007

This paper investigates the extent to which differences in information costs can explain the equity home bias puzzle. In a model where the cost of acquiring information regarding the Foreign asset is higher than for the Home asset, we show thatif cost functions are convexthe expected size of...

Persistent link: https://www.econbiz.de/10005858507

Two Paradigms and Nobel Prizes in Economics : A Contradiction or Coexistence?

Levy, Haim; De Giorgi, Enrico; Hens, Thorsten - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003

development of Prospect Theory. Can these two apparently contradictory paradigms coexist? In deriving the CAPM, Sharpe, Lintner … and risk aversion. Kahneman & Tversky suggest Prospect Theory (PT) and Cumulative Prospect Theory (CPT) as an alternative … paradigm to EU theory. They show that investors distort probabilities, make decisions based on change of wealth, exhibit loss …

Persistent link: https://www.econbiz.de/10005858578

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