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A Characterization of the Coskewness-Cokurtosis Pricing Model

Back, Kerry - 2014

establishes a parallel to the CAPM, which is equivalent to the absence of positive alpha returns. It also establishes a parallel …

Persistent link: https://www.econbiz.de/10013051572

Asset-Pricing Anomalies at the Firm Level

Cederburg, Scott - 2014

portfolio-based methods. In our initial tests, we confirm the existence of several CAPM anomalies at the firm level. Prominent … linked to their additional factors. Further results suggest that the economic importance of CAPM anomalies is overstated. We … find that anomalies are primarily confined to small stocks, few characteristics are associated with CAPM alphas out of …

Persistent link: https://www.econbiz.de/10013052445

Recursive Utility and Jump-Diffusions

Aase, Knut K. - 2014

We derive the equilibrium interest rate and risk premiums using recursive utility for jump-diffusions. Compared to to the continuous version, including jumps allows for a separate risk aversion related to jump size risk in addition to risk aversion related to the continuous part. We also...

Persistent link: https://www.econbiz.de/10013056418

Asset Pricing Theory for Two Price Economies

Madan, Dilip B. - 2014

this hypothesis. In general we observe that asset pricing theory in two price economies leads to asset pricing inequalities …

Persistent link: https://www.econbiz.de/10013056517

Arbitrage-Free Affine Models of the Forward Price of Foreign Currency

Durham, J. Benson - 2014

Forward foreign exchange contracts embed not only expected depreciation but also a sizable premium, which complicates inferences about anticipated returns. This study derives arbitrage-free affine forward currency models (AFCMs) with closed-form expressions for both unobservable variables. Model...

Persistent link: https://www.econbiz.de/10013057782

Value or Growth? Pricing of Idiosyncratic Cash-Flow Risk with Heterogeneous Beliefs

Gallmeyer, Michael F. - 2015

We study a continuous-time pure exchange economy where idiosyncratic cash flow risks are priced via investors' heterogeneous beliefs. Investors perceive idiosyncratic cash flow risks differently through heterogeneous subjective mean growth rates on a firm's cash flow. This impacts equilibrium...

Persistent link: https://www.econbiz.de/10013019887

Recursive Utility and the Equity Premium Puzzle : A Discrete-Time Approach

Aase, Knut K. - 2015

We study the Epstein-Zin model with recursive utility. Recognizing that recursive preferences implies that the underlying model is not Markovian, we use methods not depending upon the Markov property to solve the model. We work with the returns directly, which we approximate by Taylor series...

Persistent link: https://www.econbiz.de/10013024734

Risk Premiums, Liquidities, and Bubbles under Heterogeneous Beliefs

Cao, Huining Henry - 2016

We develop a model in which investors have heterogeneous beliefs about both the mean and the risk of future signals and the final stock payoff. As investors who perceive the lowest risk vary across different periods, the overall perception of the market risk is reduced in an economy with dynamic...

Persistent link: https://www.econbiz.de/10012985235

How Investors Set Valuation Ratios Using a Micro-Founded Gordon Asset Pricing Model

Blanken, Ronald - 2016

A Micro-Founded Gordon Asset Pricing Model (MF-GAPM) is developed that allows calculation of the current E/P of an equity using reported data. In the original Gordon Model, the discounting is done assuming constant growth and a constant discount rate, with the simple result E/P = r - g where r...

Persistent link: https://www.econbiz.de/10012987416

The financial origins of non-fundamental risk

Acharya, Sushant; Dogra, Keshav; Singh, Sanjay R. - 2022 - Last updated: January 14, 2022

We formalize the idea that the financial sector can be a source of non-fundamental risk. Households' desire to hedge against price volatility can generate price volatility in equilibrium, even absent fundamental risk. Fearing that asset prices may fall, risk-averse households demand safe assets...

Persistent link: https://www.econbiz.de/10012798791