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Risk preferences, global market conditions and foreign debt: Is there any role for the currency composition of FX reserves?
Mateane, Lebogang - 2020
I use a transition probability matrix associated with different global market conditions and I assume that it captures switches in central bank preferences between approximated constant relative risk aversion (CRRA) expected utility and approximated increasing relative risk aversion (IRRA)...
Persistent link: https://www.econbiz.de/10012383818
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Home bias in global bond and equity markets: the role of real exchange rate volatility
Fidora, Michael; Fratzscher, Marcel; Thimann, Christian - 2006
This paper focuses on the role of real exchange rate volatility as a driver of portfolio home bias, and in particular as an explanation for differences in home bias across financial assets. We present a Markowitz-type portfolio selection model in which real exchange rate volatility induces a...
Persistent link: https://www.econbiz.de/10011604731
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Leveraged Carry Trade Portfolios
Darvas, Zsolt - 2008
Studying all possible pairs of eleven major currencies and eleven portfolios in 1976-2008 we show that, when there is no leverage, carry trade is significantly profitable for most currency pairs and portfolios. Positive returns do not diminish in time providing a strong case against the...
Persistent link: https://www.econbiz.de/10010494390
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Hedging the Exchange Rate Risk in International Portfolio Diversification: Currency Forwards versus Currency Options
Maurer, Raimond; Valiani, Shohreh - 2003
As past research suggest, currency exposure risk is a main source of overall risk of international diversified portfolios. Thus, controlling the currency risk is an important instrument for controlling and improving investment performance of international investments. This study examines the...
Persistent link: https://www.econbiz.de/10010316299
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Prospect Theory and Higher Moments
Ågren, Martin - 2006
The paper relates cumulative prospect theory to the moments of returns distributions, e.g. skewness and kurtosis, assuming returns are normal inverse Gaussian distributed. The normal inverse Gaussian distribution parametrizes the first- to forth-order moments, making the investigation...
Persistent link: https://www.econbiz.de/10010321576
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Revisiting the home bias puzzle: Downside equity risk
Campbell, Rachel A.; Kräussl, Roman - 2006
Deviations from normality in financial return series have led to the development of alternative portfolio selection models. One such model is the downside risk model, whereby the investor maximizes his return given a downside risk constraint. In this paper we empirically observe the...
Persistent link: https://www.econbiz.de/10010298345
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Prospect theory and asset allocation
Fortin, Ines; Hlouskova, Jaroslava - 2022
two-asset problem of the PT investor for one risk-free and one risky asset and find that loss aversion and the reference … focus on investors with PT preferences under different scenarios regarding the reference return and the degree of loss … aversion and compare their portfolio performance with the performance of investors under CVaR, risk neutral, linear loss averse …
Persistent link: https://www.econbiz.de/10013262906
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Optimal asset allocation under quadratic loss aversion
Fortin, Ines; Hlouskova, Jaroslava - 2012
We study the asset allocation of a quadratic loss-averse (QLA) investor and derive conditions under which the QLA … loss-averse portfolios, QLA portfolios display significantly less risk but they also yield lower returns. …
Persistent link: https://www.econbiz.de/10010290997
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Biases of professional exchange rate forecasts: Psychological explanations and an experimentally based comparison to novices
Leitner, Johannes; Schmidt, Robert; Bofinger, Peter - 2003
The empirical performance of macroeconomic exchange rate models is more than disappointing. This dismal result is also reflected in the forecasting capabilities of professional analysts: all in all, analysts are not in a position to beat naïve random walk forecasts. The root for this deficient...
Persistent link: https://www.econbiz.de/10010305737
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Myopic Loss Aversion, the Equity Premium Puzzle, and GARCH
Ågren, Martin - 2005
This paper concerns the distributional assumptions made on stock returns in the myopic loss aversion (MLA) proposed …
Persistent link: https://www.econbiz.de/10010321544