Showing 1 - 10 of 158
Using nonparametric techniques, we develop a methodology for estimating conditional alphas and betas and long-run alphas and betas, which are the averages of conditional alphas and betas, respectively, across time. The tests can be performed for a single asset or jointly across portfolios. The...
Persistent link: https://www.econbiz.de/10009359903
Using nonparametric techniques, we develop a methodology for estimating and testing conditional alphas and betas and long-run alphas and betas, which are the averages of conditional alphas and betas, respectively, across time. The estimators and tests can be implemented for a single asset or...
Persistent link: https://www.econbiz.de/10010593836
Economists have long recognized that investors care differently about downside losses versus upside gains. Agents who place greater weight on downside risk demand additional compensation for holding stocks with high sensitivities to downside market movements. We show that the cross-section of...
Persistent link: https://www.econbiz.de/10005718657
Agents who place greater weight on the risk of downside losses than they are attach to upside gains demand greater compensation for holding stocks with high downside risk. We show that the cross-section of stock returns reflects a premium for downside risk. Stocks that covary strongly with the...
Persistent link: https://www.econbiz.de/10012714789
If investors are more averse to the risk of losses on the downside than of gains on the upside, investors ought to demand greater compensation for holding stocks with greater downside risk. Downside correlations better capture the asymmetric nature of risk than downside betas, since conditional...
Persistent link: https://www.econbiz.de/10012715018
We develop a new methodology for estimating time-varying factor loadings and conditional alphas based on nonparametric techniques. We test whether long-run alphas, or averages of conditional alphas over the sample, are equal to zero and derive test statistics for the constancy of factor...
Persistent link: https://www.econbiz.de/10005198853
It is widely believed that correlations between international equity markets tend to increase in highly volatile bear markets. This has led some to doubt the benefits of international diversification. This article solves the dynamic portfolio choice problem of a US investor faced with a...
Persistent link: https://www.econbiz.de/10012715152
We ask whether stock returns in France, Germany, the UK and the US are predictable by three instruments: the dividend yield, the earnings yield and the short rate. The predictability regression is suggested by a present value model with earnings growth, payout ratios and the short rate as state...
Persistent link: https://www.econbiz.de/10012715055
We present a model of optimal allocation to liquid and illiquid assets, where illiquidity risk results from the restriction that an asset cannot be traded for intervals of uncertain duration. Illiquidity risk leads to increased and state-dependent risk aversion, and reduces the allocation to...
Persistent link: https://www.econbiz.de/10013046466
About once a quarter. We compute optimal tactical asset allocation (TAA) policies over equities and bonds when both asset returns are predictable. By varying how often the weights are reset, we estimate the benefits and costs of different frequencies of TAA decisions. Tactical tilts taking...
Persistent link: https://www.econbiz.de/10013026963