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Financial markets with trade on risk and return
Smith, Kevin - 2019
In this paper, I develop a model in which risk-averse investors possess private information regarding both a stock's expected payoff and its risk. These investors trade in the stock and a derivative whose payoff is driven by the stock's risk. In equilibrium, the derivative is used to speculate...
Persistent link: https://www.econbiz.de/10012244489
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When Uncertainty and Volatility are Disconnected : Implications for Asset Pricing and Portfolio Performance
Ait-Sahalia, Yacine; Matthys, Felix; Osambela, Emilio; … - 2021
We analyze an environment where the uncertainty in the equity market return and its volatility are both stochastic and may be potentially disconnected. We solve a representative investor's optimal asset allocation and derive the resulting conditional equity premium and risk-free rate in...
Persistent link: https://www.econbiz.de/10014349013
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When Uncertainty and Volatility Are Disconnected : Implications for Asset Pricing and Portfolio Performance
Ait-Sahalia, Yacine; Matthys, Felix; Osambela, Emilio; … - 2021
We analyze an environment where the uncertainty in the equity market return and its volatility are both stochastic, and may be potentially disconnected. We solve a representative investor's optimal asset allocation and derive the resulting conditional equity premium and risk-free rate in...
Persistent link: https://www.econbiz.de/10013227154
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Changes in risk and asset prices
Schlesinger, Harris; Gollier, Christian - 2001
We examine asset prices in a representative-agent model of general equilibrium. Assuming only that individuals are risk averse, we determine conditions on the changes in asset risk that are both necessary and sufficient for the asset price to fall. We show that these conditions neither imply,...
Persistent link: https://www.econbiz.de/10011398103
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Common risk factors in equity markets
Atanasov, Victoria - 2014 - This version: May 26, 2014
Empirical measures of world consumption growth risk have failed to rationalize the cross-section of country equity returns. We propose a new factor, termed "the global consumption factor", to explain the patterns in risk premiums on international equity markets. We identify this factor as the...
Persistent link: https://www.econbiz.de/10010362976
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Downside Risk and Long-Horizon Stock Return Reversals
Artavanis, Nikolaos T. - 2013
We argue that long-horizon return reversals [Debondt and Thaler (1985)] reflect a premium for downside risk. Consistent with this, we find that downside betas of past losers are significantly greater than downside betas of past winners, and the inclusion of downside beta in Fama-Macbeth...
Persistent link: https://www.econbiz.de/10013091349
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Short Selling, Regulatory Flip/Flops and Uncertainty : Implications for Asset Pricing and Asset Allocation
Batur, Onay - 2014
After seventy years with no changes to short sale regulation, the United States Securities and Exchange Commission intervened three times with regulatory action from July 2007 through October 2008. The Commission first loosened restrictions on short sales by repealing the “Uptick Rule” in...
Persistent link: https://www.econbiz.de/10013065451
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Expected Equity Returns Should Correlate with Idiosyncratic Risk
Bruno, Giovanni - 2018
law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries … implications of the theory. Time variation in asset ivol causes time variation in the option value of equity that translates into …
Persistent link: https://www.econbiz.de/10012910108
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Identifying Portfolio-Based Systematic Risk Factors in Equity Markets
Grobys, Klaus - 2016
Four new prominent asset pricing factors have recently been proposed. We test whether these factors fulfill necessary conditions for qualifying those as risk factors. We show that the investment and betting-against-beta factors fulfill these conditions. However, the profitability and quality...
Persistent link: https://www.econbiz.de/10013003083
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Dealing with Non-Normality When Estimating Abnormal Returns and Systematic Risk of Private Equity : A Closed-Form Solution
Buchner, Axel - 2015
investments documented is lower than found in previous studies that estimate a standard CAPM, which is consistent with the theory … systematic risk and abnormal returns. In addition, unlike previous studies that derive estimates based on the standard CAPM, the … method employs a generalized CAPM that is based on the equilibrium model of Rubinstein (1976).This generalized CAPM …
Persistent link: https://www.econbiz.de/10013020161