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Optimal Investment and Consumption with Return Predictability and Execution Costs
Ma, Guiyuan - 2019
We provide a closed-form solution to an optimal investment and consumption problem for a constant absolute risk aversion (CARA) agent, who faces execution costs when trading correlated risky assets with return predictability. The optimal investment strategy indicates that the agent should trade...
Persistent link: https://www.econbiz.de/10012871582
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Optimal Trading with Short-Term Predictability and Transaction Costs
Murthy, Shashidhar; Wald, John K. - 2023
We consider the problem of optimal dynamic trading in the presence of predictable returns and proportional transaction costs for an investor choosing among multiple assets. The value of each security equals the expected value of holding the asset plus the value of all options to trade. We...
Persistent link: https://www.econbiz.de/10014350267
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Supplementary Material for 'Asset Pricing Restrictions on Predictability : Frictions Matter'
de Roon, Frans - 2011
Persistent link: https://www.econbiz.de/10013129967
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What Do Fund Flows Reveal About Asset Pricing Models and Investor Sophistication?
Jegadeesh, Narasimhan - 2019
models. Berk and van Binsbergen (2016) claim that this evidence indicates CAPM is the best asset pricing model but Barber …
Persistent link: https://www.econbiz.de/10012900390
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Aggregate Asset Growth and Expected Stock Returns
Kim, Min S. - 2018
This paper suggests a novel approach for predicting aggregate stock returns at quarterly and annual frequencies. Weak return predictability is consistent with the view that a stationary component of stock prices is highly persistent. In such cases, expected returns are time-varying but also...
Persistent link: https://www.econbiz.de/10012937379
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The Predictability Implied by Consumption-Based Asset Pricing Models : A Review of the Theory and Empirical Evidence
Chen, Jiun-Lin - 2018
The consumption-based models have a lack of predictive power for explaining variability of stock returns. This paper examines two well-known models, Campbell and Cochrane (1999)'s habit model and Bansal and Yaron (2004)'s long-run risks model, to see whether they produce a significant power of...
Persistent link: https://www.econbiz.de/10012940391
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Combination Return Forecasts and Portfolio Allocation with the Cross-Section of Book-to-Market Ratios
Detzel, Andrew L. - 2017
In this paper, we forecast industry returns out-of-sample using the cross-section of book-to-market ratios and investigate whether investors can exploit this predictability in portfolio allocation. Cash-flow and return forecasting regressions show that cross-industry book-to-market ratios...
Persistent link: https://www.econbiz.de/10012968901
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Semivariance Premium and Expected Stock Returns
Huang, Tao - 2020
We find a negative relationship between the individual stocks' semivariance premia, defined as the difference between the risk-neutral and physical expected downside semivariances, and future stock returns. The high-minus-low hedge portfolio earns the excess return of -64 (-46) basis points per...
Persistent link: https://www.econbiz.de/10012851750
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Economic Evaluation of Asset Pricing Models Under Predictability
Hansen, Erwin - 2021
We perform an out-of-sample comparison of linear factor asset pricing models from an economic perspective under predictability. We assess the economic value added of several factor models when a Bayesian investor is faced with a portfolio allocation problem whereby each model imposes...
Persistent link: https://www.econbiz.de/10013226488
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Does the CAPM Predict Returns?
Hasler, Michael - 2020
We provide empirical evidence that CAPM-betas positively predict asset returns when market returns are predicted to be … high, which occurs about every other month. Consequently, the product of beta and the predicted market return (CAPM …, trading strategies exploiting the forecasting power of the CAPM have Sharpe ratios up to 100% larger than the corresponding …
Persistent link: https://www.econbiz.de/10012849611