Risk parity is an asset allocation strategy designed so each asset class contributes equally to overall portfolio risk (as measured by volatility). While risk parity offers potential advantages, its success hinges on key assumptions and a favorable environment for bonds. Like the traditional...

There is a strand of CAPM based analytical research in accounting that uncovers a little known CAPM corollary, namely that the firm's cost of capital is a joint effect of its payoff risk and payoff mean. The CAPM equilibrium mechanism has the effect that the "numerator" (expected payoff) drives...

Stocks with high idiosyncratic volatility perform poorly relative to low idiosyncratic volatility stocks. We offer a novel explanation of this anomaly based on real options, which is consistent with earlier findings on idiosyncratic volatility (the positive contemporaneous relation between...

While discussing risk issues someone told me as a joke that she wished the world were riskless and the fact that risk were present in any instance in our lives was a rather unfortunate circumstance. But would we be really better off in a riskless world?Although it may appear to be a trivial...

If two investments have the same payoff covariance with the market but one has higher expected payoff, which asset according to the CAPM has most risk? One answer is that as far as risk goes the two assets are the same, because they have the same covariance with the market. The correct answer,...

This paper examines the effect of economic policy uncertainty on the performance of the real estate sector proxied by Real Estate Investment Trust (REIT) returns in the United States. Using monthly REIT index data and the monthly changes in a newly constructed index of economic policy...

A new method for seismic risk identification is proposed based on the average measure of the expected annualized losses from earthquake occurrence. We show can be identified the risk for insurance decisional purposes. The analysis is useful for insured as well as for insurance company. When risk...

Reverse mortgages provide an alternative source of funding for retirement income and health care costs. The two main risks that reverse mortgage providers face are house price risk and longevity risk. Recent real estate literature has shown that the idiosyncratic component of house price risk is...

Purpose: The purpose of this paper is to examine the changing risk structure of German open-end funds using semi variance based performance measures. Design/methodology: The analysis focuses on an appropriate benchmark and compares classical performance measures with LPM based measures....

We study the returns the venture capital and private equity investment from 221 venture capital and private equity funds that are part of 72 venture capital and private equity firms, 5040 entrepreneurial firms (3826 venture capital and 1214 private equity), and spanning 32 years (1971 - 2003)...