One of the significant problems of a modern economy and economics is political risk. A destructive influence of politics on the financial market cannot be ignored. It is necessary to indicate some selected specific problems of the financial market connected with politics in the area of: public...

The role of uncertainty in the global economy is now widely recognized by policy-makers but its effects on the international financial system are less understood. In this paper we assess the impact of uncertainty fluctuations on the interconnectedness within the international system of equity...

This article aims to build through the collection of inputs from prior research, regulatory input and practitioner's experience, a comprehensive definition of risk.Risk is not measurable uncertainty nor volatility. Risk is a three part concept: (1) risk is the potential that events may have an...

Excessive risk-taking of financial agents drew a lot of attention in the aftermath of the financial crisis. Low interest rates and subdued market volatility during the Great Moderation are sometimes blamed for stimulating risk-taking and leading to the recent financial crisis. In recent years,...

A multiple agent model is developed where traders must receive, process, and send communications to and from a distant market. This model highlights the importance that information theory's communication constraints have on the level of price uncertainty each agent faces. The collective...

Presentation Slides for "Overconfidence, Arbitrage, and Equilibrium Asset Pricing" This paper offers a model in which asset prices reflect both covariance risk and misperceptions of firmsapos prospects, and in which arbitrageurs trade against mispricing. In equilibrium, expected returns are...

Recent empirical studies suggest that, during times of unexpected innovation, agents heterogeneously update their beliefs about an asset fundamental value, and they are uncertain about other agents' beliefs on it. In this paper I show that, when there is uncertainty about the market sentiment,...

Financial markets enable risk sharing and efficient allocation of capital. We characterize how these roles interact in a “feedback effects” model with diversely informed, risk-averse investors and a manager who learns from prices when making an investment decision. While learning from prices...

Sentiment should exhibit its strongest effects on asset prices at times when valuations are most subjective. Consistent with this hypothesis, we show that a one-standard-deviation increase in aggregate uncertainty amplifies the predictive ability of sentiment for market returns by two to four...

Systematic mispricing primarily affects speculative stocks and predominantly results in overpricing, predicting lower average returns. Because speculative stocks overlap with stocks deemed risky by rational models, failing to control for exposure to systematic mispricing can bias tests of...