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Rebalancing Multiple Assets with Mutual Price Impact

Guasoni, Paolo - 2016

We find asymptotically optimal trading policies for long-term investors with constant relative risk aversion, in a multiple-assets market where expected returns and covariances are constant, and the execution price of each asset is linear in the trading intensities of all assets. Trading towards...

Persistent link: https://www.econbiz.de/10013005269

Portfolio Rebalancing and Asset Pricing with Heterogeneous Inattention

Rachedi, Omar - 2017

Can households' inattention to the stock market quantitatively account for the inertia in portfolio rebalancing? I address this question by introducing an observation cost into a production economy with heterogeneous agents. In this environment inattention changes endogenously over time and...

Persistent link: https://www.econbiz.de/10012965402

Beta Bubbles

Jylha, Petri - 2017

temporary increase in its CAPM beta estimate and a decrease in its CAPM alpha. The increasing effect of breadth of ownership on …-driven components of beta estimates that we find contribute to the empirical failure of the CAPM and the large returns to long …

Persistent link: https://www.econbiz.de/10012971144

Asset Pricing with Downside Liquidity Risks

Anthonisz, Sean A. - 2015

We develop a parsimonious liquidity-adjusted downside capital asset pricing model to investigate if phenomena such as downward liquidity spirals and flights to liquidity impact expected asset returns. We find strong empirical support for the model. Downside liquidity risk (sensitivity of stock...

Persistent link: https://www.econbiz.de/10013036136

Beliefs, Portfolio Constraints, Speculation and Asset Pricing : A General Equilibrium Analysis

Dau, Nam - 2018

This paper studies the interaction of borrowing and short-sale constraints and their ultimate effects on asset pricing properties in a simultaneous presence of the constraints in a dynamic general equilibrium model with heterogeneous risk aversions and heterogeneous beliefs in the aggregate cash...

Persistent link: https://www.econbiz.de/10012912715

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

Institutional Investors, Heterogeneous Benchmarks and the Comovement of Asset Prices

Buffa, Andrea M - 2018

We study the equilibrium implications of a multi-asset economy in which asset managers are subject to different benchmarks, and demonstrate how heterogeneous benchmarking generates a mechanism through which fundamental shocks propagate across assets. Fluctuations in asset managers' capital...

Persistent link: https://www.econbiz.de/10012910534

Financial Stress and Asset Prices

Zong, Xiaoyu; He, Xuezhong - 2021

Stockholders are faced with both macroeconomic uncertainty and uncertainty that is generated from fears. We develop a financial stress factor as a proxy for pessimism that operates through stockholders' expectations about the elevated market volatility and shocks the cross-section of stock...

Persistent link: https://www.econbiz.de/10013235055

Equity Duration

Mullins, Gary - 2021

The concept of bond duration was originally introduced by Macaulay (1938) and nowadays is well- established in the fixed-income literature. In this paper, I lift the same concepts from the fixed-income asset class and apply them to equities. I derive three candidate models for estimating the...

Persistent link: https://www.econbiz.de/10013242407

Ambiguous Information, Portfolio Inertia, and Excess Volatility

Illeditsch, Philipp K. - 2011

I study the effects of risk and ambiguity (Knightian uncertainty) on optimal portfolios and equilibrium asset prices when investors receive information that is difficult to link to fundamentals. I show that the desire of investors to hedge ambiguity leads to portfolio inertia and excess...

Persistent link: https://www.econbiz.de/10013133587