estimates are consistent with blas´ behavior and counter-cyclical risk aversion. …

-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 … and risk aversion. Kahneman & Tversky suggest Prospect Theory (PT) and Cumulative Prospect Theory (CPT) as an alternative …

state of the economy. We find that Knightian pessimism generates substan-tial First Order Risk Aversion (FORA) sects that … findings show that realistic amounts of both pessimism and standard risk aversion yield substantial equity premia and low …

lead banks to increase their risk exposure precisely in high volatility" states, because of an anticipatory effect of VaR … implications of Value-at-Risk (VaR) regulation in continuous time economies with intermediate consumption, stochastic opportunity … set, and heterogenous attitudes to risk. Our findings show that the partial equilibrium incentives of VaR regulation can …

internationally because of the larger potential for risk reduction. The question that we raise in this paper is how to select the …

This paper investigates model risk issues in the context of mean-variance portfolio selection. We analytically and …, we perform simulations leading to the conclusion that, under classical estimation, model risk bias dominates estimation … risk bias. Finally, we suggest a diagnostic tool to warnthe analyst of the presence of extreme returns that have an …

investment strategy that does not take liquidity shocks into account, exposes insurance companies to the risk of bankruptcy. This …