We show analytically under quite general conditions that implied rates of return based on analysts' earnings forecasts are only a downward biased estimator for future expected one-period returns and therefore not suited for computing market risk premia. The extent of this bias is substantial as...

The most relevant practical impediment to an application of the Markowitz portfolio selection approach is the problem of estimating return moments, in particular return expectations. We analyze the consequences of using return estimates implied by analysts' dividend forecasts under the explicit...

We show analytically under quite general conditions that time-varying implied rates of return based on analysts' earnings forecasts are only a downward biased estimator for future expected one-period returns and therefore not suited for computing market risk premia in order to resolve the equity...

Enhanced machine learning methods provide an encouraging alternative to forecast asset prices by extending or generalizing the possible model specifications compared to conventional linear regression methods. Even if enhanced methods of machine learning in the literature often lead to better...

Two factors have proven to be strongly relevant for the subprime mortgage crisis. The first is the lack of screening incentives of originators, which had not been anticipated by investors. The second is that investors relied too much on credit ratings. We examine whether investors have learned...

CAT bonds are important instruments for the insurance of catastrophe risk. Due to a low degree of deal standardization, there is uncertainty about the determination of the CAT bond premium. In addition, it is not apparent how CAT bonds react after the financial crisis or a natural catastrophe....

CAT bonds are of significant importance in the field of alternative risk transfer. Since the market of CAT bonds is not complete, the application of an appropriate pricing model is of high relevance. We apply different premium calculation models in order to compare them with regard to their...