A recent literature shows how an increase in volatility reduces leverage. However, in order to explain pro …-cyclical leverage it assumes that bad news increases volatility, that is, it assumes an inverse relationship between first and second … volatility. We show that, in a model with endogenous leverage and heterogeneous beliefs, agents have the incentive to invest …

A recent literature shows how an increase in volatility reduces leverage. However, in order to explain pro …-cyclical leverage it assumes that bad news increases volatility, that is, it assumes an inverse relationship between first and second … volatility. We show that, in a model with endogenous leverage and heterogeneous beliefs, agents have the incentive to invest …

The literature on leverage until now shows how an increase in volatility reduces leverage. However, in order to explain … pro-cyclical leverage it assumes that bad news increases volatility. This paper suggests a reason why bad news is more … often than not associated with higher future volatility. We show that, in a model with endogenous leverage and heterogeneous …

time and the state variables of the model then a sufficient condition for market completeness is that the volatility of …

introduce a non-anticipative stochastic volatility stock price model right at the beginning and infer representations for the …

(1) level and risk dynamics. The latter includes (2) tail risk and crisis probability as well as (3) the Volatility …

During the recent financial crisis, there was a dramatic spike, across all industries, in the volatility of individual … spikes in firm-specific price volatility, a pattern that poses a puzzle in terms of existing financial theory. The most … difficult economic times. This discovery of a long history of crisis-induced spikes in firm-specific price volatility has …

Recent studies show that volatility-managed equity portfolios realize higher Sharpe ratios than portfolios with a … volatility targeting on the Sharpe ratio is negligible. However, the impact of volatility targeting goes beyond the Sharpe ratio …-tail” events tend to be less severe, as they typically occur at times of elevated volatility, when a target-volatility portfolio …