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We propose double bootstrap methods to test the mean-variance efficiency hypothesis when multiple portfolio groupings of the test assets are considered jointly rather than individually. A direct test of the joint null hypothesis may not be possible with standard methods when the total number of...
Persistent link: https://www.econbiz.de/10011396677
The end result of major sporting events has been shown to affect next-day stock returns through shifts in investor mood. By studying the soccer matches that led to the elimination of France and Italy from the 2010 FIFA World Cup, we show that moodrelated pricing effects can materialize as...
Persistent link: https://www.econbiz.de/10010335693
Entrepreneurs need cash to finance their real investments. Since cash is costly to hold, entrepreneurs will underinvest. If entrepreneurs can access financial markets prior to learning about an investment opportunity, they can sell some of their less liquid assets for cash and, as a result,...
Persistent link: https://www.econbiz.de/10010352181
We decompose total variance into its bad and good components and measure the premia associated with their fluctuations using stock and option data from a large cross-section of firms. The total variance risk premium (VRP) represents the premium paid to insure against fluctuations in bad variance...
Persistent link: https://www.econbiz.de/10012014433
We use relative value to measure limits to arbitrage in fixed-income markets. Relative value captures apparent deviations from no-arbitrage relationships. It is simple, intuitive and can be computed model-free for any bond. A pseudo-trading strategy based on relative value generates higher...
Persistent link: https://www.econbiz.de/10012014452
This paper shows that changes in market participants' fear of rare events implied by crude oil options contribute to oil price volatility and oil return predictability. Using 25 years of historical data, we document economically large tail risk premia that vary substantially over time and...
Persistent link: https://www.econbiz.de/10012014454
Equilibrium bond-pricing models rely on inflation being bad news for future growth to generate upward-sloping nominal yield curves. We develop a model that can generate upward-sloping nominal and real yield curves by instead using ambiguity about inflation and growth. Ambiguity can help resolve...
Persistent link: https://www.econbiz.de/10012014479
This paper finds that Government of Canada benchmark bonds tend to be more illiquid over the subsequent month when there is a large increase in government debt supply. The result is both statistically and economically significant, stronger for the long-term than the short-term sector, and is...
Persistent link: https://www.econbiz.de/10012014490
Motivated by the observation that survey expectations of stock returns are inconsistent with rational return expectations under real-world probabilities, we investigate whether alternative expectations hypotheses entertained in the literature on asset pricing are consistent with the survey...
Persistent link: https://www.econbiz.de/10012014527
In this paper I study the relationship between rationality and asset prices when agents have heterogeneous and incorrect beliefs about future events. Using the fully rational pricing as a benchmark, I show that when agents behave according to the Subjective Generalized Kelly rule (Bottazzi et...
Persistent link: https://www.econbiz.de/10012060623