We conduct a comprehensive asset pricing analysis for the U.S. property/liability insurance industry using monthly data from 1988 to 2015. We find that state-of-the-art models such as the Fama and French (2015) five-factor model cannot explain the returns of property/liability insurance stocks...

This paper extends the classic factor-based asset pricing model by including network linkages in linear factor models. We assume that the network linkages are exogenously provided. This extension of the model allows a better understanding of the causes of systematic risk and shows that (i)...

In this paper we address three main objections of behavioral finance to the theory of rational finance, considered as “anomalies” the theory of rational finance cannot explain: (i) Predictability of asset returns; (ii) The Equity Premium; (iii) The Volatility Puzzle. We offer resolutions of...

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...

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...

This paper investigates whether short-term momentum and long-term reversal may emerge from the wealth reallocation process taking place in speculative markets. We assume that there are two classes of investors who trade long-lived assets by holding constantly rebalanced portfolios based on their...

This study compares the pricing efficiency of two domestic exchange-traded funds (ETFs) (i.e., Falcom 30 and HSBC 20) listed on the Saudi stock exchange (i.e., Tadawul), as well as an international ETF (i.e., iShares MSCI Saudi Arabia) listed on the NYSE, by examining the extent and properties...

The hedge fund industry has grown from $200 billion in assets under management around the turn of the millennium to now over $3 trillion. Many reports have criticized hedge funds for poor performance, particularly since the 2008 global financial crisis (GFC). In this paper, I seek to demystify...