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This paper establishes general conditions for the validity of mutual fund separation and the equilibrium CAPM. We use partial preference orders that display weak form mean preserving spread (w-MPS) risk aversion in the sense of Ma (2011). We derive this result without imposing any distributional...
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This paper proposes a novel way of pricing S&P500 index options in the presence of jump risk. Our analysis is built upon an equilibrium option pricing rule for a representative agent economy. In particular, we use the weighted utility's certainty equivalent to specify agent's risk preference,...
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This paper presents the shadow Capital Asset Pricing Model (CAPM) of Ma (2011a) as an intertemporal equilibrium asset pricing model, and tests it empirically. In contrast to the classical CAPM - a single factor model based on a strong behavioral or distributional assumption, the shadow CAPM can...
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This paper is on decision theoretical foundations for various types of VaR models, including VaR and conditional-VaR, as objective measures of downside risk for financial prospects. We establish the connections of the VaRs with the first- and the second-order stochastic dominance investment...
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