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Active Portfolio Management, Positive Jensen-Jarrow Alpha, and Zero Sets of CAPM
Charles-Cadogan, G. - 2011
We present conditions under which positive alpha exists in the realm of active portfolio management - in contrast to the controversial result in (Jarrow (2010) which implicates delegated portfolio management by surmising that positive alphas are illusionary. Specifically, we show that the...
Persistent link: https://www.econbiz.de/10013117245
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A Long Run Risks Model of Asset Pricing with Fat Tails
Wang, Zhiguang - 2011
We explore the effects of fat tails on the equilibrium implications of the long run risks model of asset pricing by introducing innovations with dampened power law to consumption and dividends growth processes. We estimate the structural parameters of the proposed model by maximum likelihood. We...
Persistent link: https://www.econbiz.de/10013122690
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Internal Valuation of Assets with Liquidity Risk
Nauta, Bert-Jan - 2019
The inclusion of funding costs in the valuation of derivatives resulting in the so-called funding valuation adjustment (FVA) is a topic of intense debate, model development, and research. One issue with standard formulations of FVA is that it is the same for liquid and illiquid assets. Even if...
Persistent link: https://www.econbiz.de/10012905080
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Expected Equity Returns Should Correlate with Idiosyncratic Risk
Bruno, Giovanni - 2018
law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries … implications of the theory. Time variation in asset ivol causes time variation in the option value of equity that translates into …
Persistent link: https://www.econbiz.de/10012910108
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A Model for the Valuation of Assets with Liquidity Risk
Nauta, Bert-Jan - 2016
This paper describes a model for the valuation of assets on a bank balance sheet with liquidity risk. The new feature of this model is that it explicitly incorporates the funding term of an asset. The inclusion of the funding term is important since it determines the expected liquidation loss....
Persistent link: https://www.econbiz.de/10013003042
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Asset Pricing Implications of Volatility Term Structure Risk
Xie, Chen - 2014
I find that stocks with high sensitivities to changes in the VIX slope exhibit high returns on average. The price of VIX slope risk is approximately 2.5% annually, statistically significant and cannot be explained by other common factors, such as the market excess return, size, book-to-market,...
Persistent link: https://www.econbiz.de/10013044719
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Ambiguity, long-run risks, and asset prices
Wei, Bin - 2021
I generalize the long-run risks (LRR) model of Bansal and Yaron (2004) by incorporating recursive smooth ambiguity aversion preferences from Klibanoff et al. (2005, 2009) and time-varying ambiguity. Relative to the Bansal-Yaron model, the generalized LRR model is as tractable but more flexible...
Persistent link: https://www.econbiz.de/10012617667
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Construction, Systematic Risk, and Stock-Level Investment Anomalies
Aretz, Kevin; Kagkadis, Anastasios - 2021
shocks, we demonstrate that our evidence is consistent with neoclassical finance theory …
Persistent link: https://www.econbiz.de/10013239312
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Factor Investing, Learning from Prices, and Endogenous Uncertainty in Asset Markets
Dim, Chukwuma; Sangiorgi, Francesco; Vilkov, Grigory - 2021
We study learning and uncertainty under the factor investing paradigm using an endogenous information model with correlated assets. As investors shift attention from firms towards systematic risk factors, stock prices become less informative, increasing systematic uncertainty and incentivizing...
Persistent link: https://www.econbiz.de/10013247042
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Commodity futures return predictability and intertemporal asset pricing
Cotter, John; Eyiah-Donkor, Emmanuel; Potì, Valerio - 2020
We find out-of-sample predictability of commodity futures excess returns using forecast combinations of 28 potential predictors. Such gains in forecast accuracy translate into economically significant improvements in certainty equivalent returns and Sharpe ratios for a mean-variance investor....
Persistent link: https://www.econbiz.de/10012418356