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Shen, Sally - 2018

We develop a robust optimal dynamic hedging strategy that takes both downside risks and market incompleteness into account for an agent who fears model misspecification. The robust agent is assumed to minimize the shortfall between the assets and liabilities under an endogenous worst case...

Persistent link: https://www.econbiz.de/10012937852

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

Undiversifiable Returns in a CAPM Economy

Braila, Peghe - 2011

within the GEI-CAPM (General Equilibrium with Incomplete Markets Capital Asset Pricing Model). Both the mutual fund and …

Persistent link: https://www.econbiz.de/10013128151

Asset Price Trend Theory : Reframing Portfolio Theory from the Ground Up

Dubois, Robert - 2013

Traditional portfolio optimization models specify placement of capital as rather irrevocably and fully at risk through investment horizon(s) or continuously. Under this constraint, asset class allocation typically serves as primary mode of diversification, pursuing risk moderation by seeking to...

Persistent link: https://www.econbiz.de/10013084090

Liquidity as an Investment Style

Ibbotson, Roger G. - 2013

We present comprehensive evidence in support of giving liquidity equal standing to size, value/growth, and momentum as investment styles, as defined by Sharpe (1992). First, we show that financial market liquidity, as identified by stock turnover, is an economically significant indicator of...

Persistent link: https://www.econbiz.de/10013093548

General Financial Economic Equilibria

Madan, Dilip B. - 2020

When demands and supplies are uncertain, given the prices, equilibrium cannot be defined by equating them. New … redefine economic equilibrium. The market sets two prices for each commodity, one at which it buys and the other at which it …. For an n- commodity economy there are 2n equilibrium equations for the 2n prices. The introduction of a two price labor …

Persistent link: https://www.econbiz.de/10012837724

Loss Aversion, Survival and Asset Prices

Easley, David - 2016

This paper studies the wealth and pricing implications of loss aversion in the presence of arbitrageurs with Epstein-Zin preferences. Loss aversion affects an investor's survival prospects mainly through its effect on the investor's portfolio holdings. Loss-averse investors will be driven out of...

Persistent link: https://www.econbiz.de/10013008691

Portfolio Constraints, Differences in Beliefs and Bubbles

Bidian, Florin - 2020

I propose an arbitrage-based theory of bubbles in economies with general portfolio constraints and differences in beliefs. I find that, in general, bubbles cannot exist unless the constraints restrict the demand for credit sufficiently to induce low interest rates. Speculation due to...

Persistent link: https://www.econbiz.de/10012856797

Beyond the Local Mean-Variance Analysis in Continuous Time : The Problem of Non-Normality

Aase, Knut K. - 2015

equilibrium, short-term interest rate in the conventional rational expectations equilibrium model of Lucas (1978). We consider a …

Persistent link: https://www.econbiz.de/10013027493

Risk Allocation and Financial Intermediation

Goussebaïle, Arnaud - 2021

The classic Arrow-Debreu framework requires a very large number of specific securities to reach Pareto optimality. The present paper shows that financial intermediation can play an important role in maintaining a more parsimonious market framework while still obtaining Pareto optimality. In the...

Persistent link: https://www.econbiz.de/10013212181

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