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Joint extreme events in equity returns and liquidity and their cross-sectional pricing implications

Ruenzi, Stefan; Ungeheuer, Michael; Weigert, Florian - 2020 - This version: January 2020

We merge the literature on downside return risk and liquidity risk and introduce the concept of extreme downside … liquidity (EDL) risks. The cross-section of stock returns reflects a premium if a stock's return (liquidity) is lowest at the … same time when the market liquidity (return) is lowest. This effect is not driven by linear or downside liquidity risk or …

Persistent link: https://www.econbiz.de/10012175486

Value around the world

Caliskan, Nilufer; Hens, Thorsten - 2013

We show that in a consumption-based asset-pricing model with hyperbolic discounting leading to dynamically inconsistent time preferences value premium increases nonlin-early with the degree of discounting and thus affects cross section of returns. To test our model empirically, we relate the...

Persistent link: https://www.econbiz.de/10009751115

Global variance term premia and intermediary risk appetite

Van Tassel, Peter; Vogt, Erik - 2016

Sellers of variance swaps earn time-varying risk premia for their exposure to realized variance, the level of variance swap rates, and the slope of the variance swap curve. To measure risk premia, we estimate a dynamic term structure model that decomposes variance swap rates into expected...

Persistent link: https://www.econbiz.de/10011523781

Pricing of idiosyncratic equity and variance risks

Gourier, Elise - 2016

This paper decomposes the risk premia of individual stocks into contributions from systematic and idiosyncratic risks. I introduce an affine jump-diffusion model, which accounts for both the factor structure of asset returns and that of the variance of idiosyncratic returns. The estimation is...

Persistent link: https://www.econbiz.de/10011410917

Conditional Asset Pricing and Momentum

Huynh, Thanh - 2014

Winner stocks have higher risk exposure to Fama and French's (1993) three factors (FF3F) than loser stocks during good economic times, and therefore should earn higher expected returns. Employing the conditional FF3F model to risk adjust returns on winner and loser stocks can reduce the average...

Persistent link: https://www.econbiz.de/10013065594

Behavioral Finance - Asset Prices Predictability, Equity Premium Puzzle, Volatility Puzzle : The Rational Finance Approach

Rachev, Svetlozar T. - 2020

) The Volatility Puzzle. We offer resolutions of those objections within the rational finance. We do not claim that those …

Persistent link: https://www.econbiz.de/10012842392

Diffusing Explosive Portfolio Performance Evaluation of High Frequency Traders

Charles-Cadogan, G. - 2018

Several analysts report explosive annualized Sharpe Ratios (ASRs) for investment portfolio performance evaluation of high frequency traders (HFTers) ranging from 4.3 to 5,000. This suggests that the profitability of HFT is much higher than that of other actively managed portfolios. In highly...

Persistent link: https://www.econbiz.de/10012937216

Ambiguity, long-run risks, and asset prices

Wei, Bin - 2021

I generalize the long-run risks (LRR) model of Bansal and Yaron (2004) by incorporating recursive smooth ambiguity aversion preferences from Klibanoff et al. (2005, 2009) and time-varying ambiguity. Relative to the Bansal-Yaron model, the generalized LRR model is as tractable but more flexible...

Persistent link: https://www.econbiz.de/10012617667

Does Idiosyncratic Volatility Proxy for a Missing Risk Factor? Evidence Using Portfolios as Test Assets

Gempesaw, David; Kassa, Haim; Zykaj, Blerina Bela - 2021

One of the main explanations for the idiosyncratic volatility (IVOL) puzzle (i.e., the negative relation between lagged …

Persistent link: https://www.econbiz.de/10013235185

Why does return predictability concentrate in bad times?

Cujean, Julien; Hasler, Michael - 2017

We build an equilibrium model to explain why stock return predictability concentrates in bad times. The key feature is that investors use different forecasting models, and hence assess uncertainty differently. As economic conditions deteriorate, uncertainty rises and investors' opinions...

Persistent link: https://www.econbiz.de/10011721618

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