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Compared to using the variance of index returns, managing investment by the average of the variance of index components (AV) produces significant return and ratio performance improvements. AV managed investment in the market index takes less extreme leverage making it more practical and cheaper...
Persistent link: https://www.econbiz.de/10012898875
Risk forecasting is crucial for informed investment decision-making. Moreover, the salience of investment risk increases during economically uncertain times. In this paper, we study how sell-side analysts form expectations of firm risk, under different macroeconomic conditions (low versus high...
Persistent link: https://www.econbiz.de/10012829616
theory. Research implications/limitations - The research emphasized that in order to get a more diversified investment …
Persistent link: https://www.econbiz.de/10013166371
We consider two forms of volatility weighting (own volatility and underlying asset volatility) applied to cross-sectional and time-series momentum strategies. We present some simple theoretical results for the Sharpe ratios of weighted strategies and show empirical results for momentum...
Persistent link: https://www.econbiz.de/10012904317
This paper examines the advantages of incorporating strategic exposure to equity volatility into the investment-opportunity set of a long-term equity investor. We consider two standard volatility investments: implied volatility and volatility risk premium strategies. To calibrate and assess the...
Persistent link: https://www.econbiz.de/10012905949
We develop a dynamic valuation model of the hedge fund seeding business by solving the consumption and portfolio-choice problem for a risk-averse manager who launches a hedge fund through a seeding vehicle. This vehicle, i.e. fees-for-seed swap, specifies that a strategic partner (seeder)...
Persistent link: https://www.econbiz.de/10012904759
We prove that the total risk of a portfolio held by an investor with preferences described by a power utility with subsistence or a HARA utility, is a weighted sum of the covariances between the portfolio's return and higher-order powers of that return, shifted by the subsistence level. We show...
Persistent link: https://www.econbiz.de/10013153350
We formulate the open-loop control framework for time-consistent mean-variance (TCMV) portfolio problems in incomplete markets with stochastic volatility (SV). We offer the existence and uniqueness results of the TCMV equilibrium controls for general SV models and derive explicit closed-form...
Persistent link: https://www.econbiz.de/10012898197
In this paper, first we study a stochastic volatility market model for which an explicit candidate solution to the problem of maximizing utility function of terminal wealth is obtained. Applying this result, we present a complete solution for the Heston model which is a particular case of the...
Persistent link: https://www.econbiz.de/10013109855
Using high-frequency data, we decompose the time-varying beta for stocks into beta for continuous systematic risk and beta for discontinuous systematic risk. Estimated discontinuous betas for S&P500 constituents between 2003 and 2011 generally exceed the corresponding continuous betas. We...
Persistent link: https://www.econbiz.de/10011506397