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Financial markets with trade on risk and return

Smith, Kevin - 2019

In this paper, I develop a model in which risk-averse investors possess private information regarding both a stock …'s expected payoff and its risk. These investors trade in the stock and a derivative whose payoff is driven by the stock's risk …. In equilibrium, the derivative is used to speculate on the stock's risk and to hedge against adverse fluctuations in the …

Persistent link: https://www.econbiz.de/10012244489

On the evolutionary stability of the sentiment investor

Antico, Andrea; Bottazzi, Giulio; Giachini, Daniele - 2022

The behavioural finance literature attributes the persistent market misvaluation observed in real data to the presence of deviations from rational thinking of the actors involved. Cognitive biases and the use of simple heuristics can be described using expected utility maximising agents that...

Persistent link: https://www.econbiz.de/10013161531

Rationality and asset prices under belief heterogeneity

Giachini, Daniele - 2018

In this paper I study the relationship between rationality and asset prices when agents have heterogeneous and incorrect beliefs about future events. Using the fully rational pricing as a benchmark, I show that when agents behave according to the Subjective Generalized Kelly rule (Bottazzi et...

Persistent link: https://www.econbiz.de/10011805975

Market selection and learning under model misspecification

Bottazzi, Giulio; Giachini, Daniele; Ottaviani, Matteo - 2023

This paper studies market selection in an Arrow-Debreu economy with complete markets where agents learn over misspecified models. Under model misspecification, standard Bayesian learning loses its formal justification and biased learning processes may provide a selection advantage. However,...

Persistent link: https://www.econbiz.de/10014283575

Optimum portfolio selection over the period 2016-2021 under South Korea : an empirical analysis

Kundu, Amit; Sah, Shubham - In: The Indian journal of economics 103 (2022) 409,2, pp. 247-261

Persistent link: https://www.econbiz.de/10014364335

Sources of financial synchronism : arbitrage theory and the promise of risk-free profit

Langenohl, Andreas - In: Finance and society 4 (2018) 1, pp. 26-40

traced back to certain developments in economic theory since the so-called "marginalist revolution", which enabled the …

Persistent link: https://www.econbiz.de/10012034585

Profitability of Trading in the Direction of Asset Price Jumps – Analysis of Multiple Assets and Frequencies

Fičura, Milan - 2017

Futures the system achieved mostly a loss. We attribute this (in the latter two cases) to the effect of a rising market risk …

Persistent link: https://www.econbiz.de/10012964934

Exogenous Noise or Endogenous Feedback? Exploring the Sources of Excess Comovement in an Emerging Stock Market

Yao, Jing - 2015

We study the effect of country-specific noise on stock price comovement. Using a sample of dual-listed stocks, we show that the effect persists over time for some largest A-shares traded in China, but diminishes quickly for their H-shares traded in Hong Kong. We then examine whether the noise...

Persistent link: https://www.econbiz.de/10013033771

Greed and Individual Trading Behavior in Experimental Asset Markets

Hoyer, Karlijn; Zeisberger, Stefan; Breugelmans, Seger; … - 2021

Greed has been shown to be an important economic motive. Both the popular press as well as scientific papers have mentioned questionable practices by greedy bankers and investors as one of the root causes of the 2008 global financial crisis. In spite of these suggestions, there is as of yet no...

Persistent link: https://www.econbiz.de/10013242440

Can VAR Models Capture Regime Shifts in Asset Returns? A Long-Horizon Strategic Asset Allocation Perspective

Guidolin, Massimo - 2010

-horizon investor with constant relative risk aversion preferences. In a horse race in which models are not considered in their … individuality but instead as an overal class, we find that a power utility investor with a constant coefficient of relative risk …

Persistent link: https://www.econbiz.de/10013137095