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CAPM and capital budgeting: present versus future, equilibrium versus disequilibrium, decision versus valuation

Magni, Carlo Alberto - Volkswirtschaftliche Fakultät, … - 2007

This paper deals with the use of the CAPM for capital budgeting purposes. Four different measures are deductively drawn from this model: the disequilibrium Net Present Value, the equilibrium Net Present Value, the disequilibrium Net Future Value, the equilibrium Net Future Value. While all of...

Persistent link: https://www.econbiz.de/10005055505

Effects of Background Risks on Cautiousness with an Application to a Portfolio Choice Problem

Hara, Chiaki - 2008

We provide necessary and sufficient conditions on an individual's expected utility function under which any zero-mean idiosyncratic risk increases cautiousness (the derivative of the reciprocal of the absolute risk aversion), which is the key determinant for this individual's demand for options...

Persistent link: https://www.econbiz.de/10012724077

Mutual Fund Portfolio Choice in the Presence of Dynamic Flows

Kaniel, Ron - 2008

investor is allowed to dynamically allocate capital between a riskless asset and an actively managed mutual fund who charges … though the investor is myopic. Our model predicts a positive relationship between a fund's proportional fee rate and its … the investor's trading strategy depend on the proportional fee rate, the equilibrium value functions do not. Implications …

Persistent link: https://www.econbiz.de/10012728039

Market Consistent Pricing of Insurance Products

Malamud, Semyon - 2007

We present the first step in a program to develop a comprehensive, unified equilibrium theory of asset and liability pricing. We give a mathematical framework for pricing insurance products in a multiperiod financial market. This framework reflects classical economic principles (like utility...

Persistent link: https://www.econbiz.de/10012730492

Efficient Risk-Sharing Rules with Heterogeneous Risk Attitudes and Background Risks

Kuzmics, Christoph - 2006

In an exchange economy in which there is a complete set of markets for macroeconomic risks but no market for idiosyncratic risks, we consider how the efficient risk-sharing rules for the macroeconomic risk are affected by the heterogeneity in the consumers' risk attitudes and idiosyncratic...

Persistent link: https://www.econbiz.de/10012733610

Substitutability between Equity Reits and Mortgage Reits

Lee, Ming-Long - 2007

This study extends Seck's (1996) approach to investigate the degree of substitutability between equity real estate investment trusts (EREITs) and mortgage real estate investment trusts (MREITs). The variance ratio test and the variance decomposition of forecast errors yield results indicating...

Persistent link: https://www.econbiz.de/10012778061

Heterogeneity of Investors and Asset Pricing on a Risk-Value World

Franke, Guenter - 2003

Portfolio choice and the implied asset pricing are usually derived assuming maximization of expected utility. In this paper, they are derived from risk-value models which generalize the Markowitz-model. We use a behaviorally based risk measure with an endogenous or exogenous benchmark. A richer...

Persistent link: https://www.econbiz.de/10012740423

The Perception of Time, Risk and Return During Periods of Speculation

Derman, Emanuel - 2002

What return should you expect when you take on a given amount of risk? How should that return depend upon other people's behavior? What principles can you use to answer these questions? In this paper, we approach these topics by exploring the consequences of two simple hypotheses about risk.The...

Persistent link: https://www.econbiz.de/10012741621

Effects of Background Risks on Cautiousness with an Application to a Portfolio Choice Problem

Hara, Chiaki; Huang, James; Kuzmics, Christoph - Center for Intergenerational Studies, Institute of … - 2008

We provide a necessary and a sufficient condition on an individual's expected utility function under which any zero-mean idiosyncratic risk increases cautiousness (the derivative of the reciprocal of the absolute risk aversion), which is the key determinant for this individual's demand for...

Persistent link: https://www.econbiz.de/10005018277

Heterogeneity of Investors and Asset Pricing in a Risk-Value World

Franke, Günter; Weber, Martin - C.E.P.R. Discussion Papers - 2003

Portfolio choice and the implied asset pricing are usually derived assuming maximization of expected utility. In this Paper, they are derived from risk-value models that generalize the Markowitz-model. We use a behaviourally based risk measure with an endogenous or exogenous benchmark. If the...

Persistent link: https://www.econbiz.de/10005136483

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