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For many decades the only way to invest in volatility has been through trading options, futures, or variance swaps. But … in recent years a number of volatility-related exchange traded Funds (ETFs) and Exchange Traded Notes (ETNs) have been … launched which make volatility trading accessible to the retail investor and fund managers without the need to access futures …
Persistent link: https://www.econbiz.de/10013082981
Pension funds investment behavior have found to be persistent over time. Empirical findings of such persistence support … conjectures that belief biases such as overoptimism and reputational concerns affect fiduciary investment behavior. Standard mean …-variance analyses do not consider the implications of prudent-man laws on pension fund investment. We suggest an alternative way to …
Persistent link: https://www.econbiz.de/10013127871
constitutes a link between arbitrage choice theory and corporate investment theory, and shows that explicit discounting is not …This paper deals with capital budgeting decisions under uncertainty. We present an Aggregate Return On Investment (AROI … which, compared with the risk-adjusted cost of capital, correctly signals wealth creation. For choosing between two mutually …
Persistent link: https://www.econbiz.de/10012973932
, while reducing pooled annuity income volatility and downside risk, as well as an investment strategy that reduces exposure … investment returns and risk, provide an attractive and effective alternative to traditional guaranteed life annuity products …. While longevity risk sharing in pooled annuities has received recent attention, incorporating investment risk beyond fixed …
Persistent link: https://www.econbiz.de/10013363078
According to recent research, diversification across risk factors (or investment styles) proves to be more efficient … worthwhile to combine risk factors in a dynamic manner, in a process that we call Dynamic Risk Allocation (DRA). Building a DRA … process.Our main finding is that risk factor allocation largely replaces traditional global equity and bond market premiums as …
Persistent link: https://www.econbiz.de/10013006973
significantly, when an inter-temporal risk parity strategy is applied. Volatility clustering and fat tails are behind this …Inter-temporal risk parity is a strategy that rebalances risky assets and cash in order to target a constant level of … ex-ante risk over time. When applied to equities and compared to a buy-and-hold portfolio it is known to improve the …
Persistent link: https://www.econbiz.de/10013033533
law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory …Because levered equity is an option on the firm, variations in asset idiosyncratic risk (ivol) induces a negative … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries …
Persistent link: https://www.econbiz.de/10012910108
We analyze an environment where the uncertainty in the equity market return and its volatility are both stochastic, and … conditional equity premium and risk-free rate in equilibrium. Our empirical analysis shows that the equity premium appears to be … earned for facing uncertainty, especially high uncertainty that is disconnected from lower volatility, rather than for facing …
Persistent link: https://www.econbiz.de/10013227154
Risk decomposition is a standard tool for analyzing investment portfolio risk. The portfolio is divided into notional … parts—e.g., individual securities, holdings by sector or region, factor exposures—whose contributions to net risk are … composition changes with price movement and estimates have errors. Since behavior only in the direction of net risk is counted …
Persistent link: https://www.econbiz.de/10013234910
In this study, we investigate the attenuation of idiosyncratic risk and corresponding benefits of diversification for … absolute benefits of risk reduction by testing the homogeneity of variances of portfolios of different sizes using Levene …
Persistent link: https://www.econbiz.de/10013100687