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Beta Risk in the Cross-Section of Equities

Boloor, Ali - 2019

We develop a continuous-time intertemporal CAPM model that allows for risky beta exposure, which we explicitly specify. In the model, the expected return on a stock depends on beta's co-movement with market variance and more generally with the stochastic discount factor and deviates from the...

Persistent link: https://www.econbiz.de/10012899147

The Pricing of Market Jumps in the Cross-Section of Stocks and Options

Babaoglu, Kadir - 2018

Market index and individual stock returns exhibit jumps in addition to normal shocks. Equities have exposure to the market and sensitivity to the market is important for explaining equity returns and option prices. I develop a new factor model that explores (i) if a separate beta for market...

Persistent link: https://www.econbiz.de/10012936701

Returns of Claims on the Upside and the Viability of U-Shaped Pricing Kernels

Bakshi, Gurdip - 2018

When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...

Persistent link: https://www.econbiz.de/10012940716

The Pricing Kernel Is U-shaped

Sichert, Tobias - 2020

Numerous studies find S-shaped pricing kernels, which is conflicting with standard theory. In contrast to that, based on a novel GARCH model with structural breaks, I show that the pricing kernel is consistently U-shaped. The results are robust to variations in the methodology and hold for...

Persistent link: https://www.econbiz.de/10012853175

Is Idiosyncratic Volatility Risk Priced? Evidence from the Physical and Risk-Neutral Distributions

Boloor, Ali - 2014

We use simultaneous data from equity, index and option markets in order to estimate a single-factor market model in which idiosyncratic volatility is allowed to be priced. We model the index dynamics' physical distribution as a mean-reverting stochastic volatility process as in Heston (1993),...

Persistent link: https://www.econbiz.de/10013056816

Beta risk in the cross-section of equities

Boloorforoosh, Ali; Christoffersen, Peter F.; Fournier, … - 2017

We develop a conditional capital asset pricing model in continuous-time that allows for stochastic beta exposure. When beta co-moves with market variance and the stochastic discount factor (SDF), beta risk is priced, and the expected return on a stock deviates from the security market line. The...

Persistent link: https://www.econbiz.de/10011646407

Arbitraging Mispriced Assets with Separation Portfolios to Lessen Total Risk

Apreda, Rodolfo - 2009

This paper expands on a procedure to arbitrage mispriced assets against the benchmark provided by the Security Market … least total risk among other alternative portfolios. Coming next, such arbitrage is dealt directly with one single … separation portfolio, which grants that the total risk linked with the arbitrage portfolio equals the non-systematic risk …

Persistent link: https://www.econbiz.de/10013159871