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Downside Risks and the Cross-Section of Asset Returns

Farago, Adam - 2017

In an intertemporal equilibrium asset pricing model featuring disappointment aversion and changing macroeconomic uncertainty, we show that besides the market return and market volatility, three disappointment-related factors are also priced: a downstate factor, a market downside factor, and a...

Persistent link: https://www.econbiz.de/10012963402

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

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

Chapter 13 Consumption-based asset pricing

Campbell, John Y. - 2003

theory. Data from other countries are examined to see which features of the U.S. experience apply more generally. The chapter …

Persistent link: https://www.econbiz.de/10014023858

Chapter 12 Tests of multifactor pricing models, volatility bounds and portfolio performance

Ferson, Wayne E. - 2003

Three concepts: stochastic discount factors, multi-beta pricing and mean-variance efficiency, are at the core of modern empirical asset pricing. This chapter reviews these paradigms and the relations among them, concentrating on conditional asset-pricing models where lagged variables serve as...

Persistent link: https://www.econbiz.de/10014023859

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

Ambiguous Information, Risk Aversion, and Asset Pricing

Illeditsch, Philipp K. - 2011

I study the effects of aversion to risk and ambiguity (uncertainty in the sense of Knight (1921)) on the value of the market portfolio when investors receive public information that they find difficult to link to fundamentals and hence treat as ambiguous. I show that small changes in public...

Persistent link: https://www.econbiz.de/10013134524

Endogenous Indeterminacy and Volatility of Asset Prices Under Ambiguity

Mandler, Michael - 2012

If agents are ambiguity-averse and can invest in productive assets, asset prices can robustly exhibit indeterminacy in the markets that open after the productive investment has been launched. For indeterminacy to occur, the aggregate supply of goods must appear in precise configurations but the...

Persistent link: https://www.econbiz.de/10013114388

Investing in Emerging Markets : An Asymmetric Stochastic Multivariate Volatility Model to Diversify Efficiently a Portfolio of Assets

Rannou, Yves - 2014

The asset allocation is a practical problem for most institutional and private investors, who routinely deal with a wide variety of stocks, bonds and options. Evidence suggests that both the expected return and the volatility vary over time. Many studies find that the expected returns have...

Persistent link: https://www.econbiz.de/10013055149

Ambiguity and Volatility : Asset Pricing Implications

Pataracchia, Beatrice - 2011

Using a simple dynamic consumption-based asset pricing model, this paper explores the implications of a representative investor with smooth ambiguity averse preferences [Klibanoff, Marinacci and Mukerji, Econometrica (2005)] and provides a comparative analysis of risk aversion and ambiguity...

Persistent link: https://www.econbiz.de/10013127171