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We identify the S-Shaped consumption utility by reconciling consumption decisions with asset returns. Different from the concave-shaped utility, the S-shaped consumption utility predicts a possible negative correlation between low quantiles of consumption growth and asset returns, for which we...
Persistent link: https://www.econbiz.de/10013307483
Why are stock prices much more volatile than the underlying dividends? The excess volatility of prices can in principle be attributed to two different causes: time-varying discount rates for expected future dividends, arising from variation in risk premia; or the irrational exuberance of...
Persistent link: https://www.econbiz.de/10013234155
Findings from brain sciences show that the brain must first optimize on its own internal resources before seeking to optimize on the resources available in the external world. We show that this modest change is perspective, from resource-constrained humans to resource-constrained brains,...
Persistent link: https://www.econbiz.de/10013249635
We document that mortgaged homebuyers pay an 11% premium relative to all-cash buyers in residential real estate transactions. This premium far exceeds the 3\% premium implied by a realistically calibrated model of rational home sellers with transaction frictions. We obtain similar results from...
Persistent link: https://www.econbiz.de/10013242989
This paper introduces a new sentiment-augmented asset pricing model and provides a com-prehensive understanding of the role of this sentiment-driven risk factors. We find that news andsocial media search-based indicators are significantly related to excess returns of internationalequity...
Persistent link: https://www.econbiz.de/10012832768
We develop a four-factor model intended to capture size, value, and credit rating transition patterns in excess returns for a panel of predominantly mid- and large-cap entities. Using credit transition matrices and rating histories from 48 US issuers, we provide evidence to support a...
Persistent link: https://www.econbiz.de/10012242861
We find that option expensiveness, as measured by delta-hedged option returns, is higher for low-ESG stocks, indicating that investors pay a premium in the option market to hedge ESG-related uncertainty. We estimate this ESG premium to be about 0.3% per month. All three components of ESG...
Persistent link: https://www.econbiz.de/10012593635
We examine subjective risk premia implied by return expectations of individual investors and professionals for aggregate portfolios of stocks, bonds, currencies, and commodity futures. While in-sample predictive regressions with realized excess returns suggest that objective risk premia vary...
Persistent link: https://www.econbiz.de/10013298393
I show that time-varying risk aversion can generate a term structure of equity risk premia that is upward sloping in bad times and downward sloping in good times. I derive three conditions that jointly generate this result. First, risk aversion is negatively correlated with consumption growth....
Persistent link: https://www.econbiz.de/10013403898
Corporate reputation has deserved attention in recent years from firms and researchers given its impact on creating a competitive advantage and on keeping a sustained superior performance. However, the impact of corporate reputation on risk, in addition to being less studied, still presents...
Persistent link: https://www.econbiz.de/10014295000