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Are stock markets really like beauty contests? - Empirical evidence of higher order belief's impact on asset prices

Monnin, Pierre - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

order belief", on asset price volatility. The paper shows that heterogeneous expectations induce higher order beliefs and … that heterogeneous expectation asset pricing models thoretically generate more volatility than rational expectation models … results shows that a model with higher order beliefs generates a level of volatility in line with the price volatility …

Persistent link: https://www.econbiz.de/10005857785

Risk Management for Derivatives in Illiquid Markets : A Simulation-Study

Frey, Rüdiger; Patie, Pierre - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002

new explanation of the smile pattern of implied volatility related to the lack of market liquidity. Finally we present …

Persistent link: https://www.econbiz.de/10005859384

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 Pricing of Interest Rate and Credit Risks in Equity Returns : An Empirical Cross-Country Comparison

Chambet, Anthony; Gibson, Rajna - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

In this study, we examine whether changes in the investment opportunityset stemming from interest rate and credit risks are priced in the US, theUK and the Swiss equity premia by estimating both two-factor and three-factor versions of Mertons ICAPM. The systematic pricing of credit riskis...

Persistent link: https://www.econbiz.de/10005857973

Valuation, Liquidity and Risk in Government Bond Markets

Favero, Carlo; Pagano, Marco; Thadden, Ernst-Ludwig von - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

We explore the determinants of yield differentials between long-term sovereigen bonds in Europa area. There is a common trend in yield differentials, which is correlated with the measure of tghe international risk factor. In contrast, liquidity differentials display sizeable hetrogeneity and no...

Persistent link: https://www.econbiz.de/10005858005

Market and Currency Risk Premia during Financialand Political Crises : An Asset Pricing Perspective

Loebb, Joachim - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

This empirical study analyzes market and currency risk premia during ﬁnancial and political crises within the theoretical framework of the international asset pricing model of Adler and Dumas (1983). The econometric speciﬁcation extends the multivariate GARCH approach of De Santis and Gerard...

Persistent link: https://www.econbiz.de/10005858143

Theory and Calibration of Swap Market Models

Galluccio, Stefano; Huang, Zhijhang; Ly, Jean-Michel; … - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004

This pap er intro duces a general framework for market mo dels, namedM arket M o del Approach, through the concept of admissible sets of for-ward swap rates spanning a given tenor structure. We relate this conceptto results in graph theory by showing that a set is admissible if and only ifthe...

Persistent link: https://www.econbiz.de/10005858304

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

Limits to Arbitrage when Market Participation Is Restricted

Hens, Thorsten; Heringsy, Jean-Jacques; … - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003

There is an extensive literature claiming that it is often difficultto make use of arbitrage opportunities in ﬁnancial markets. Thispaper provides a new reason why existing arbitrage opportunitiesmight not be seized. We consider a world with short-lived securities,no short-selling constraints...

Persistent link: https://www.econbiz.de/10005858363

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

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

Markowitz and Sharpe won the Nobel Prize in Economics more than a decade ago for the development of Mean-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...

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