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Heterogeneous Beliefs about Rare Event Risk in the Lucas Orchard
Piatti, Ilaria - 2017
This paper investigates the asset pricing implications of investor disagreement about the likelihood of a systematic disaster. I specify a general equilibrium model with multiple trees and heterogeneous beliefs about rare event risk, to understand how risk-sharing mechanisms affect equity and...
Persistent link: https://www.econbiz.de/10012973305
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Option-implied information and predictability of extreme returns
Vilkovz, Grigory; Xiaox, Yan - 2013 - This version: January 28, 2013
We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...
Persistent link: https://www.econbiz.de/10010226098
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How Index Futures and ETFs Affect Stock Return Correlations
Leippold, Markus - 2016
impact on stock return correlations than shocks to futures. We confirm the model predictions by studying the correlation of U …
Persistent link: https://www.econbiz.de/10013004525
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The VIX and Future Information
Hess, Markus - 2020
In this paper, we propose an innovative VIX model which takes future market information available to the traders into account. The future information is modeled by an initially enlarged filtration in our setup. We derive an explicit representation for the anticipative VIX process and obtain the...
Persistent link: https://www.econbiz.de/10012831500
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High Short Interest Effect and Aggregate Volatility Risk
Barinov, Alexander - 2015
We propose a risk-based firm-type explanation on why stocks of firms with high relative short interest (RSI) have lower future returns. We argue that these firms have negative alphas because they are a hedge against expected aggregate volatility risk. Consistent with this argument, we show that...
Persistent link: https://www.econbiz.de/10013037671
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Jumping Off the Bandwagon : Introducing Jumps to Equity Correlation
Zetocha, Valer - 2015
The goal of this paper is to anchor a stochastic correlation model into the real-world multi-underlying equity … specifically look for a self-consistent mechanism to generate the implied correlation skew. We start with correlation model based … on the Jacobi process. In order to reach the steep short term index skew we extend it by adding jumps in correlation. The …
Persistent link: https://www.econbiz.de/10013027703
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Zero-coupon interest rates : evaluating three alternative datasets
Díaz Pérez, Antonio; Jareño, Francisco; Navarro … - 2018
The zero-coupon yield curve is a common input for most financial purposes. The authors consider three popular yield curve datasets, and explore the extent to which the decision as to what dataset to use for an application may have implications on the results. The paper illustrates why such...
Persistent link: https://www.econbiz.de/10011901875
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European equity market contagion : an empirical application to Ireland's sovereign debt crisis
Corbet, Shaen; Twomey, Cian - In: European financial and accounting journal : EFAJ 10 (2015) 3, pp. 15-34
sovereign debt crisis. A dynamic conditional correlation (DCC) multivariate GARCH model is used to estimate to what extent the …
Persistent link: https://www.econbiz.de/10011471074
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The factor-spline-GARCH model for high and low frequency correlations
Rangel, Jose Gonzalo; Engle, Robert F. - 2009
that characterize long-term correlation patterns. We associate such term behavior with low frequency economic variables … improves the empirical fit of equity correlations in the US and correlation forecasts at long horizons. -- Factor models ; Low … frequency volatilities and correlations ; Dynamic conditional correlation ; Spline-GARCH ; Idiosyncratic volatility ; Long …
Persistent link: https://www.econbiz.de/10003821063
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An ETF-Based Measure of Stock Price Fragility
Lazo-Paz, Renato - 2023
A growing literature employs equity mutual fund flows to measure a stock’s exposure to non-fundamental demand risk - stock price fragility. However, this approach may be biased by confounding fundamental information, potentially leading to underestimating risk exposure. We propose an...
Persistent link: https://www.econbiz.de/10014349522