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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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Rational trader risk
Kondor, Peter - London School of Economics (LSE) - 2004
Allowing for a richer information structure than usual, we show that rational traders’ calculation with short-term price fluctuations may heavily influence their behaviour even if the interim price is not influenced by non-rational agents i.e. there is no noise trader risk. Instead, traders...
Persistent link: https://www.econbiz.de/10010884635
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Capital Structure Arbitrage revisited
Wojtowicz, Marcin - Tinbergen Instituut - 2014
We study risk and return properties of capital structure arbitrage strategies aiming to profit from temporal mispricing … between equity and credit default swaps (CDSs) of companies. We find that capital structure arbitrage provides an attractive … annualized return of 24.35% on invested capital. The arbitrage returns are higher for lower rated companies and surprisingly they …
Persistent link: https://www.econbiz.de/10011255777
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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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Some historical perspectives on the Bond-Stock Earnings Yield Model for crash prediction around the world
Lleo, Sebastien; Ziemba, Bill - London School of Economics (LSE) - 2014
We provide a historical perspective focusing on Ziemba's experiences and research on the bond-stock earnings yield differential model (BSEYD) starting from when he first used it in Japan in 1988 through to the present in 2014. The model has called many but not all crashes. Those called have high...
Persistent link: https://www.econbiz.de/10011170088
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Mark-to-market accounting and systemic risk: evidence from the insurance industry
Ellul, Andrew; Jotikasthira, Chotibhak; Lundblad, … - London School of Economics (LSE) - 2013
in greater degrees of regulatory arbitrage before the crisis and limited loss recognition during the crisis, and (c …
Persistent link: https://www.econbiz.de/10011171756
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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