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Selection in asset markets : the good, the bad, and the unknown
Bottazzi, Giulio; Dindo, Pietro - 2011
We provide simple examples to illustrate how wealth-driven selection works in asset markets. Our examples deliver both good and bad news. The good news is that if individual assets demands are expressed as a fractions of wealth to be invested in each asset, e.g. because traders maximize an...
Persistent link: https://www.econbiz.de/10009009683
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Testing linear factor pricing models with large cross-sections : a distribution-free approach
Gungor, Sermin; Luger, Richard - 2010
-section is too large. Finally, we revisit the CAPM and the Fama-French three factor model. Our results strongly support the mean …
Persistent link: https://www.econbiz.de/10008771577
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Fund flows inducing mispricing of risk in competitive financial markets
Stahmer, Axel - 2015
This paper studies the effect of new fund flows on investment behavior and the resulting equilibrium price of risk. The … equilibrium. New flow of funds to the asset management industry lead to inefficient investment decisions, mispricing of risk, and …
Persistent link: https://www.econbiz.de/10011389297
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Diffusion-Based Models for Financial Markets Without Martingale Measures
Fontana, Claudio - 2015
In this paper we consider a general class of diffusion-based models and show that, even in the absence of an Equivalent Local Martingale Measure, the financial market may still be viable, in the sense that strong forms of arbitrage are excluded and portfolio optimisation problems can be...
Persistent link: https://www.econbiz.de/10013015958
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Arbitrage Opportunity, Impossible Frontier, and Logical Circularity in CAPM Equilibrium
Abad, Pharos - 2020
-variance market equilibrium (CAPM equilibrium, see Proposition 4) …
Persistent link: https://www.econbiz.de/10012841039
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When Prospect Theory Preference Meets Mean-Reverting Asset Returns : A Dynamic Asset Allocation Model
Gao, Jianjun - 2019
We examine how the evidence of mean-reversion in stock returns affects dynamic trading behavior for investors with prospect-theory preferences. Particular attention is paid to the trading incentives created by the interaction between prospect-theory preferences and mean-reverting return...
Persistent link: https://www.econbiz.de/10012899580
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Asset Market Equilibrium with Liquidity Risk
Jarrow, Robert A. - 2017
This paper derives an equilibrium asset pricing model with liquidity risk. Liquidity risk is modeled as a stochastic …, we prove that an equilibrium price process exists for our economy and we characterize the market's state price density …
Persistent link: https://www.econbiz.de/10012971127
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Evolutionary finance for multi-asset investors
Schnetzer, Michael; Hens, Thorsten - 2022
Standard strategic asset allocation procedures usually neglect market interaction. However, returns are not generated in a vacuum but are the result of the market's price discovery mechanism which is driven by investors' investment strategies. Evolutionary finance accounts for this and...
Persistent link: https://www.econbiz.de/10012800946
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Capital Asset Market Equilibrium With Liquidity Risk, Trading Constraints, and Asset Price Bubbles
Jarrow, Robert A. - 2018
This paper derives an equilibrium asset pricing model with endogenous liquidity risk, trading constraints, and asset … prohibitions and margin requirements. Under a strong set of assumptions, we prove a unique equilibrium price process exists for our … consumption CAPM for our economy. In contrast to the traditional models without liquidity risk or asset price bubbles, there are …
Persistent link: https://www.econbiz.de/10012929504
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Capital Asset Market Equilibrium With Liquidity Risk, Portfolio Constraints, and Asset Price Bubbles
Jarrow, Robert A. - 2018
This paper derives an equilibrium asset pricing model with endogenous liquidity risk, portfolio constraints, and asset … prohibitions and margin requirements. Under a restrictive set of assumptions, we prove a unique equilibrium price process exists … intertemporal and consumption CAPM for our economy. In contrast to the traditional models without liquidity risk or asset price …
Persistent link: https://www.econbiz.de/10012929509