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Idiosyncratic Volatility and the Intertemporal Capital Asset Pricing Model

Li, Gang - 2020

When the true asset pricing model cannot be identified, the idiosyncratic volatility obtained from a misspecified model contains information of the hedge portfolio in Merton's (1973) ICAPM. Empirically, I find that from 1815 to 2018, more than two centuries, neither equal-weighted idiosyncratic...

Persistent link: https://www.econbiz.de/10012847166

A Multi-Factor Model of Idiosyncratic Volatility

van der Heijden, Thijs - 2020

equity return volatilities (IVOL). In a standard dynamic capital structure model in which the CAPM holds for asset returns …

Persistent link: https://www.econbiz.de/10012851753

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

Mean Swap Variance, Portfolio Thoery and Asset Pricing

Chow, Victor - 2018

the classical MV portfolio theory and the CAPM, is consistent with expected utility maximization for all risk …

Persistent link: https://www.econbiz.de/10012934044

Energy Transition, Asset Price Fluctuations, and Dynamic Portfolio Decisions

Semmler, Willi - 2020

This paper analyzes the implications of short-termism on portfolio decisions of investors, and its potential consequences on green investments. We study a dynamic portfolio choice problem that contains two assets, one asset with fluctuating returns and another asset with a constant risk-free...

Persistent link: https://www.econbiz.de/10012823712

Asset Price Volatility and Investment Horizons : An Experimental Investigation

Anufriev, Mikhail - 2020

We study the effects of the investment horizon on asset price volatility using a Learning to Forecast experiment. We end that, for short investment horizons, participants coordinate on self-fulfilling trend extrapolating predictions. Price deviations are then reinforced and amplified, possibly...

Persistent link: https://www.econbiz.de/10012825408

Momentum-managed equity factors

Flögel, Volker; Schlag, Christian; Zunft, Claudia - 2021 - This version: July 18, 2021

Managed portfolios that exploit positive first-order autocorrelation in monthly excess returns of equity factor portfolios produce large alphas and gains in Sharpe ratios. We document this finding for factor portfolios formed on the broad market, size, value, momentum, investment, profitability,...

Persistent link: https://www.econbiz.de/10012588643

The pricing of unexpected volatility in the currency market

Lu, Wenna; Copeland, Laurence S.; Xu, Yongdeng - 2021

Many recent papers have investigated the role played by volatility in determining the cross-section of currency returns. This paper employs two time-varying factor models: a threshold model and a Markov-switching model to price the excess returns from the currency carry trade. We show that the...

Persistent link: https://www.econbiz.de/10012591966

Two Trees with Heterogeneous Beliefs : Spillover Effect of Disagreement

Han, Bing - 2017

In a model where investors disagree about the fundamentals of two stocks, the state price density depends on investor disagreements for both stocks, especially the larger stock. This implies that disagreement among investors in a large firm has a spillover effect on the pricing of other stocks...

Persistent link: https://www.econbiz.de/10012972769

An Intertemporal CAPM with Stochastic Volatility

Campbell, John Y. - 2016

This paper studies the pricing of volatility risk using the first-order conditions of a long-term equity investor who is content to hold the aggregate equity market rather than overweighting value stocks and other equity portfolios that are attractive to short-term investors. We show that a...

Persistent link: https://www.econbiz.de/10013008231