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Toxic arbitrage
Foucault, Thierry; Kozhan, Roman; Tham, Wing Wah - 2015
Short lived arbitrage opportunities arise when prices adjust with a lag to new information. They are toxic because they … expose dealers to the risk of trading at stale quotes. Hence, theory implies that more frequent toxic arbitrage opportunities … triangular arbitrage. As predicted, illiquidity is higher on days when the fraction of toxic arbitrage opportunities and …
Persistent link: https://www.econbiz.de/10010499534
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Risk Arbitrage, A Probabilistic Approach Over 1998-2010 in the US and Canada
Dieudonne, Stephane - 2010
This document is a quantitative analysis of risk arbitrage strategy across a sample of 1,911 M&A deals announced … risk arbitrage spread calculated over the first five days following the announcement of the bid. Ultimately, it is hoped …
Persistent link: https://www.econbiz.de/10013135952
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Explaining asset pricing puzzles associated with the 1987 market crash
Benzoni, Luca; Collin-Dufresne, Pierre; Goldstein, Robert S. - 2010
The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for equity index options, despite minimal changes in aggregate consumption. We explain these events within a general equilibrium framework in which expected endowment growth and economic...
Persistent link: https://www.econbiz.de/10008699179
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No good deals - no bad models
Boyarchenko, Nina; Cerrato, Mario; Crosby, John; … - 2012
Faced with the problem of pricing complex contingent claims, investors seek to make their valuations robust to model uncertainty. We construct a notion of a modeluncertainty-induced utility function and show that model uncertainty increases investors' effective risk aversion. Using this utility...
Persistent link: https://www.econbiz.de/10009679505
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Is ESG a Systematic Risk Factor for US Equity Mutual Funds?
Jin, Ick - 2021
Although the environmental, social, and governance (ESG) has gained increasing attention among investors, the extent to which ESG is compensated systematically in the market remains to be investigated. On the outperformance of responsible investing (RI) which incorporates ESG into investment...
Persistent link: https://www.econbiz.de/10013252157
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Tracking the Evolution of Idiosyncratic Risk and Cross-Sectional Expected Returns for US REITSs
Cakici, Nusret - 2014
This paper adopts the methodology in Bali and Cakici (2008) in tracking the evolution of the relation between equity REITs' idiosyncratic risk and their cross-sectional expected returns between 1981 and 2010. In addition to the full sample period, we study this relation for (i) all sample REITs,...
Persistent link: https://www.econbiz.de/10013056735
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US Sector Rotation with Five-Factor Fama-French Alphas
Sarwar, G - 2017
In this paper we investigate the risk-adjusted performance of US sector portfolios and sector rotation strategy using the alphas from the Fama-French five factor model. We find that five-factor model fits better the returns of US sector portfolios than the three factor model, but that...
Persistent link: https://www.econbiz.de/10012954123
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US Sector Rotation with Five-Factor Fama-French Alphas
Sarwar, G - 2017
In this paper we investigate the risk-adjusted performance of US sector portfolios and sector rotation strategy using the alphas from the Fama-French five factor model. We find that five factor model fits better the returns of US sector portfolios than the three factor model, but that...
Persistent link: https://www.econbiz.de/10012942790
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Creative destruction and asset prices
Grammig, Joachim; Jank, Stephan - 2013
We relate Schumpeter's notion of creative destruction to asset pricing, thereby offering a novel explanation of size and value premia. We argue that small-value firms are more likely to be destroyed by serendipitous invention activity, and investors demand higher expected returns for bearing...
Persistent link: https://www.econbiz.de/10010128421
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Macro determinants of US stock market risk premia in bull and bear markets
Bätje, Fabian; Menkhoff, Lukas - 2013
This research uses macro factors to explain four standard U.S. stock market risk premia, i.e. the market excess return (RM-RF), size (SMB), value (HML), and momentum (WML). We find in-sample predictive power of macro factors, in particular at a one-year horizon. Differentiating between bull and...
Persistent link: https://www.econbiz.de/10010239724