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I analyze a model with heterogeneous investors who have incorrect beliefs about fundamentals. Investors think that they are right at first, but over time realize that they are wrong. The speed of the realization depends on investor confidence in own beliefs and arrival of new information. The...
Persistent link: https://www.econbiz.de/10011267843
This paper deals with the CAPM-derived capital budgeting criterion, and in particular with Rubinstein’s (1973) criterion, according to which a project is profitable if the project rate of return is greater than the risk-adjusted cost of capital, where the latter depends on the project’s...
Persistent link: https://www.econbiz.de/10011267900
The Brazilian capital market has been in the last 10 years a attractive space for negotiations and opening of company’s capital. The early studies of market anomalies that are looking for evidence on reasons of understatement and overstatement at the time of the IPO in Brazil date back to...
Persistent link: https://www.econbiz.de/10011259115
The standard measures of distress risk ignore the fact that firm defaults are correlated and that some defaults are more likely to occur in bad times. We use risk premium computed from corporate credit spreads to measure a firm’s exposure to systematic variation in default risk. Unlike...
Persistent link: https://www.econbiz.de/10011259646
While the empirical literature has often documented a “default anomaly”, i.e. a negative relation between default risk and stock returns, standard theory suggests that default risk should be priced in the cross-section. In this paper, we provide an explanation for this apparent puzzle using...
Persistent link: https://www.econbiz.de/10011259881
Repo is used in India as an instrument for monetary policy by institutionalizing daily Liquidity Adjustment Facility (LAF) which allows banks and Primary Dealers to manage their liquidity needs. Liquidity stress in the market has an impact on the short term interest rate. Entities not having...
Persistent link: https://www.econbiz.de/10011260388
This paper derives an adjusted Black-Scholes pricing formula. In separating risk and uncertainty using the robust control technique, we find that both uncertainty and risk raise management’s subjective evaluation of real options. We suggest a simple method to filter the risk of the project and...
Persistent link: https://www.econbiz.de/10011260880
Using estimated CAPM-models portfolio risks of Russian mutual funds are analyzed. Two questions are considered: how did mutual funds portfolio risks change during the crisis and postcrisis periods; did portfolio managers successfully fit the portfolio structure depending on market conditions?...
Persistent link: https://www.econbiz.de/10011260907
We introduced in this study a model of sovereign debt with an embedded Down-and-In Put (DIP) to capture the discontinuity in sovereign debt pricing. This study suggests that debt forgiveness is a more effective solution in debt crisis, as repayment bonus or award or capital market exclusion...
Persistent link: https://www.econbiz.de/10011260952
The book is divided into five parts. The essence of behavioural finance is presented in the first parts. Fuzzy generalizations of some mathematical concepts are presented in the second part. The impact of selected behavioural premises for imprecise estimation of expected return is described in...
Persistent link: https://www.econbiz.de/10011260964