We investigate an asset pricing model with preferences cycling between high risk aversion and low EIS in fall/winter and the reverse in spring/summer. Calibrating to consumption data and allowing plausible preference parameter values, we produce returns that match observed equity and Treasury...

We investigate an asset pricing model with preferences cycling between high risk aversion and low EIS in fall/winter and the reverse in spring/summer. Calibrating to consumption data and allowing plausible preference parameter values, we produce returns that match observed equity and Treasury...

Currency carry trade returns are on average large and non-normally distributed. While the literature has found different explanations for the existence of carry trade returns, the higher order moments of their return distribution still pose a puzzle. We propose a new model to explain these...

We use the Bayesian method introduced by Gallant and McCulloch (2009) to estimate consumption-based asset pricing models featuring smooth ambiguity preferences. We rely on semi-nonparametric estimation of a flexible auxiliary model in our structural estimation. Based on the market and aggregate...

We merge the literature on downside return risk and liquidity risk and introduce the concept of extreme downside liquidity (EDL) risks. The cross-section of stock returns reflects a premium if a stock's return (liquidity) is lowest at the same time when the market liquidity (return) is lowest....

This paper presents the shadow Capital Asset Pricing Model (CAPM) of Ma (2011a) as an intertemporal equilibrium asset pricing model, and tests it empirically. In contrast to the classical CAPM - a single factor model based on a strong behavioral or distributional assumption, the shadow CAPM can...

Using detailed mutual fund holdings in the US market, we estimate active mutual fund managers’ loss aversion as a function of both funds’ past performance and asset allocations. We document a substantial variation in loss aversion over time. We further find managers' loss aversion is higher...

The need to understand and leverage consumer-brand bonds has become critical in a marketplace characterized by increasing unpredictability, diminishing product differentiation, and heightened competitive pressure. This is especially true for fast moving consumer goods (FMCG) manufacturers and...

A common approach to dealing with missing data is to estimate the model on the common subset of data, by necessity throwing away potentially useful data. We derive a new probit type estimator for models with missing covariate data where the dependent variable is binary. For the benchmark case of...

We propose a fund allocation strategy for a highly risk-averse investor based on pessimistic decision making to construct portfolios of four major asset classes. Using US data (indexes of stocks, bonds, real estate, and commodities) from January 1990 to December 2010, we find that the proposed...