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Lochstoer, Lars A.; Tetlock, Paul C. - 2022

We identify model-free mispricing factors and relate them to global stock prices and investor beliefs. The factors measure variation in the relative mispricing of closed-end funds and their underlying assets. We design three factors to reflect the beliefs and capital flows of important...

Persistent link: https://www.econbiz.de/10013406472

How Can Machine Learning Advance Quantitative Asset Management?

Blitz, David; Hoogteijling, Tobias; Lohre, Harald; … - 2023

The emerging literature suggests that machine learning (ML) is beneficial in many asset pricing applications because of its ability to detect and exploit nonlinearities and interaction effects that tend to go unnoticed with simpler modelling approaches. In this paper, we discuss the promises and...

Persistent link: https://www.econbiz.de/10014255027

Comparing Asset Pricing Models : The (Neglected) Impact of "Tradability"

Maio, Paulo F. - 2023

I use pairwise differences in cross-sectional R^2 to compare equity factor models (where all factors are traded) with ICAPM/macro models (where some factors are not traded) in cross-sectional asset pricing tests. Critically, I impose the theoretical restriction that the risk price estimates of...

Persistent link: https://www.econbiz.de/10014257953

The Fama and French Three-Factor Model and Leverage : Compatibility with the Modigliani and Miller Propositions

Dempsey, Michael J. - 2009

Ross's (1976) arbitrage pricing theory (APT) (FF, 1993, 1994, 1995, 1996). Such claims however are compromised by the …

Persistent link: https://www.econbiz.de/10014210218

Recursive Utility and Jump-Diffusions

Aase, Knut K. - 2015

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. The jump part...

Persistent link: https://www.econbiz.de/10013029156

Latency and Asset Prices

Kirilenko, Andrei A. - 2015

We measure message processing time or latency inside an automated trading platform. We show that latency is a random variable that has a strong predictive power over both volatility and the volatility of volatility of a highly liquid asset over and above changes in message traffic. We argue that...

Persistent link: https://www.econbiz.de/10013030845

Identifying Expectation Errors in Value/Glamour Strategies : A Fundamental Analysis Approach

Piotroski, Joseph D. - 2013

It is well established that value stocks outperform glamour stocks, yet considerable debate exists about whether the return differential reflects compensation for risk or mispricing. Under mispricing explanations, prices of glamour (value) firms reflect systematically optimistic (pessimistic)...

Persistent link: https://www.econbiz.de/10013093880

The Price of Risk in Equilibrium : A Novel Framework

Dayala, Roger - 2013

This paper offers a novel framework for understanding the equilibrium price of risk. Notably, it illustrates the CAPM …

Persistent link: https://www.econbiz.de/10013094642

The Capital Asset Pricing Model, A Fundamental Critique

Dayala, Roger - 2013

The CAPM derives an ex post equilibrium relationship for the price of non-diversifiable risk based on investors … the ex ante and ex post state of the CAPM in a hypothetical three-asset universe: either the CAPM indicates identical … respective discount rates for different amounts of risks (i.e., total risk versus non-diversifiable risk) or the CAPM indicates …

Persistent link: https://www.econbiz.de/10013094718

Expected inflation, expected stock returns, and money illusion : what can we learn from survey expectations?

Schmeling, Maik (contributor); Schrimpf, Andreas (contributor) - 2008

We show empirically that survey-based measures of expected inflation are significant and strong predictors of future aggregate stock returns in several industrialized countries both in-sample and out-of-sample. By empirically discriminating between competing sources of this return predictability...

Persistent link: https://www.econbiz.de/10003727414