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Using the pandemic as a laboratory, we show that asset markets assign a time- varying price to firms' disaster risk exposure. In 2020 the cross-section of realized and expected stock returns reflected firms' different exposure to the pandemic, as measured by their vulnerability to social...
Persistent link: https://www.econbiz.de/10012698248
In this paper, we study an irreversible investment problem under Knightian uncertainty. In a general framework, in which Knightian uncertainty is modeled through a set of multiple priors, we prove existence and uniqueness of the optimal investment plan, and derive necessary and sufficient...
Persistent link: https://www.econbiz.de/10012198652
We exploit a large reform of capital-gains taxation in Germany combined with portfolio-level daily panel data to study the causal effect of taxes on individual stock-trading behavior and the disposition effect. We find substantial spikes in selling probabilities around an intertemporal tax...
Persistent link: https://www.econbiz.de/10012295629
We study an intertemporal consumption and portfolio choice problem under Knightian uncertainty in which agent's preferences exhibit local intertemporal substitution. We also allow for market frictions in the sense that the pricing functional is nonlinear. We prove existence and uniqueness of the...
Persistent link: https://www.econbiz.de/10012315509
Do women invest differently than men? We contribute to the answer of this question by analysing the Panel on Household Finances (PHF) of the German Bundesbank. This representative panel collects a wide variety of behavioural and financial variables in the area of household finance. We find that...
Persistent link: https://www.econbiz.de/10012387111
We relate time-varying aggregate ambiguity (V-VSTOXX) to individual investor trading. We use the trading records of more than 100,000 individual investors from a large German online brokerage from March 2010 to December 2015. We find that an increase in ambiguity is associated with increased...
Persistent link: https://www.econbiz.de/10012387918
We study risk taking in a panel of subjects in Wuhan, China - before, during the COVID-19 crisis, and after the country reopened. Subjects in our sample traveled for semester break in January, generating variation in exposure to the virus and quarantine in Wuhan. Higher exposure leads subjects...
Persistent link: https://www.econbiz.de/10012419372
This paper suggests using portfolio management methods in policy planning models as a practical tool for determining optimal policy under model parameter uncertainty. We suggest that in addition to calculating the standard policy return estimates, policy options should also be analyzed from the...
Persistent link: https://www.econbiz.de/10012419412
The disposition effect is implicitly assumed to be constant over time. However, drivers of the disposition effect (preferences and beliefs) are rather countercyclical. We use individual investor trading data covering several boom and bust periods (2001-2015). We show that the disposition effect...
Persistent link: https://www.econbiz.de/10012426747
We consider a real options model for the optimal irreversible investment problem of a profit maximizing company. The company has the opportunity to invest into a production plant capable of producing two products, of which the prices follow two independent geometric Brownian motions. After...
Persistent link: https://www.econbiz.de/10012488060