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Value-at-Risk (VaR) has become the standard criterion for assessing risk in the financial industry. Given the widespread usage of VaR based risk management, it becomes increasingly important to study the effects on the stock market and the option market of these constraints. We therefore...
Persistent link: https://www.econbiz.de/10012740615
This paper analyses the optimal investment strategy for loss averse investors, assuming a complete market and general Ito processes for the asset prices. The loss averse investor follows a partial portfolio insurance strategy. When the planning horizon of the investor is short, i.e. less than 5...
Persistent link: https://www.econbiz.de/10012706627
This article studies the impact of heterogeneous loss averse investors on asset prices. In very good states loss averse investors become gradually less risk averse as wealth rises above their reference point, pushing up equity prices. When wealth drops below the reference point the investors...
Persistent link: https://www.econbiz.de/10012722220
We study how incentive fees and manager's own investment in the fund affect the investment strategy of hedge fund managers. We find that loss averse managers increase the risk of the fund's investment strategy with higher incentive fees. However, risk taking is greatly reduced if a substantial...
Persistent link: https://www.econbiz.de/10012775606
This paper presents a theoretical study of how incentives affect hedge fund risk and returns and an empirical study of the performance of a large group of operating hedge funds. Most hedge fund managers receive a flat fee plus a share of the returns above a certain benchmark. We investigate how...
Persistent link: https://www.econbiz.de/10012732222
This paper analyzes the optimal investment strategy for loss averse investors, assuming a complete market and general Ito processes for the asset prices. The loss-averse investor follows a partial portfolio insurance strategy. When the investor's planning horizon is short (less than 5 years), he...
Persistent link: https://www.econbiz.de/10012779072
We investigate the link between extreme events on the currency and stock markets for 26 countries by estimating a simultaneous equations probit model, using a sample of 2500 daily returns in the period from 1996 to 2005. In a number of emerging markets that went through a period of crisis an...
Persistent link: https://www.econbiz.de/10012779073
This article studies the impact of heterogeneous loss averse investors on asset prices. In very good states loss averse investors become gradually less risk averse as wealth rises above their reference point, pushing up equity prices. When wealth drops below the reference point the investors...
Persistent link: https://www.econbiz.de/10012562317
Persistent link: https://www.econbiz.de/10001734558
Persistent link: https://www.econbiz.de/10015045826