Market index and individual stock returns exhibit jumps in addition to normal shocks. Equities have exposure to the market and sensitivity to the market is important for explaining equity returns and option prices. I develop a new factor model that explores (i) if a separate beta for market...

We exploit a unique sample of structured financial products (SFPs) to analyze pricing and issuance dependencies among different types of such market-linked investment vehicles. Our study provides evidence of cross pricing between products with complementary payoff profiles. Such dependencies may...

Cross-sectional forecasts of conservative and optimistic biases in analyst earnings estimates predict a stock's future returns, especially for firms that are hard to value. Trading strategies--whether based on the component of analyst bias that is correlated with major return anomalies or the...

We investigate the relationship between ex-ante total skewness and holding returns on individual equity options. Recent theoretical developments predict a negative relationship between total skewness and average returns, in contrast to the traditional view that only coskewness should be priced....

This note develops the solutions of the static portfolio optimization problem in explicit matrix form. Three cases are contemplated and connected, with the derivation of relevant corner solutions: the unconstrained problem in the presence of risky assets only, the constrained one, and the...

After taking into account biases induced by infrequent trading and selection, it is unlikely that illiquid asset classes have higher risk-adjusted returns than traditional liquid stock and bond markets. On the other hand, there are significant illiquidity premiums within asset classes. Portfolio...

The study tries to practically use the widely taught Capital Asset Pricing Model (CAPM) model for making investment decisions on Bombay Stock Exchange (BSE) –500 Index. Using CAPM, the study tries to investigate whether securities on BSE 500 are over-valued, properly valued or under-valued....

The paper develops a novel econometric approach to estimate abnormal returns and systematic risk of private equity investments from observable investment cash flows. A unique feature of the method is that it gives closed-form estimators for systematic risk and abnormal returns. In addition,...

Equity-linked notes are flexible financial products that give investors favorable capital treatment. The payoff of a note depends on the performance of a basket of equities or indices averaged over a certain period, but is bounced below by a guaranteed amount. This article presents a new model...

Transaction-cost models in continuous-time markets are considered. Given that investors decide to buy or sell at certain time instants, we study the existence of trading strategies that reach a certain final wealth level in continuous-time markets, under the assumption that transaction costs,...