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The Continuous-Time CAPM with Non-Risk-Averse Investors
Levy, Moshe - 2018
The continuous-time CAPM assumes that investors are risk-averse. However, these is a very large body of empirical and … experimental evidence documenting that many investors are not globally risk-averse: Prospect Theory and aspiration-level models are …-time CAPM for all investors with non-decreasing preferences. Another advantage of the proposed approach is its simplicity: it …
Persistent link: https://www.econbiz.de/10012912723
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Contrarian Behavior, Information Networks and Heterogeneous Expectations in an Asset Pricing Market
Makarewicz, Tomasz - 2016
The paper studies the emergence of contrarian behavior in information networks in an asset pricing market. Financial traders coordinate on similar behavior, but have heterogeneous price expectations and are influenced by friends. According to a popular belief, they are prone to herding. However,...
Persistent link: https://www.econbiz.de/10012995192
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Collective risk-taking decisions with heterogeneous beliefs
Gollier, Christian - 2003
Suppose that a group of agents having divergent expectations can share risks efficiently. We examine how this group should behave collectively to manage these risks. We show that the beliefs of the representative agent is in general a function of the group.s wealth level, or equivalently, that...
Persistent link: https://www.econbiz.de/10011507677
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Evolution and market behavior with endogenous investment rules
Bottazzi, Giulio; Dindo, Pietro - 2010
In a complete market for short-lived assets, we investigate long run wealth-driven selection on a general class of investment rules that depend on endogenously determined current and past prices. We find that market instability, leading to asset mis-pricing and informational efficiencies, is a...
Persistent link: https://www.econbiz.de/10008729026
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Evolutionary finance
Evstigneev, Igor V.; Hens, Thorsten; Schenk-Hoppé, … - 2008
authors in the theory and applications of evolutionary finance models. An introduction to and the motivation of the modeling … strategies, discusses the relation to the Kelly rule and implications for asset pricing theory, and introduces a continuous …
Persistent link: https://www.econbiz.de/10003961707
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Selection in asset markets : the good, the bad, and the unknown
Bottazzi, Giulio; Dindo, Pietro - 2011
We provide simple examples to illustrate how wealth-driven selection works in asset markets. Our examples deliver both good and bad news. The good news is that if individual assets demands are expressed as a fractions of wealth to be invested in each asset, e.g. because traders maximize an...
Persistent link: https://www.econbiz.de/10009009683
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The acceleration effect and gamma factor in asset pricing
Ardila, Diego; Forró, Zalán; Sornette, Didier - 2015
We report strong evidence that changes of momentum, i.e. "acceleration", defined as the first difference of successive returns, provide better performance and higher explanatory power than momentum. The corresponding Γ-factor explains the momentum-sorted portfolios entirely but not the reverse....
Persistent link: https://www.econbiz.de/10011411974
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Fund flows inducing mispricing of risk in competitive financial markets
Stahmer, Axel - 2015
This paper studies the effect of new fund flows on investment behavior and the resulting equilibrium price of risk. The Small Fund Industry model shows equilibria with overinvestment in unprofitable and underinvestment in profitable investment opportunities. The Large Fund Industry model derives...
Persistent link: https://www.econbiz.de/10011389297
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Individuals and Their Local Utility Stocks : Preference for the Familiar
Nofsinger, John R. - 2011
We find individuals are four times more likely to purchase stocks of their local direct utility company as opposed to utility companies operating outside their state of residence. Our tests reveal that individuals do not possess superior or private information about their local utilities....
Persistent link: https://www.econbiz.de/10013119538
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Investor Sentiment and Aggregate Volatility Pricing
Labidi, Chiraz - 2015
This paper aims at providing new insights on the pricing of aggregate volatility risk by incorporating investor sentiment in the relation between sensitivity to innovations in implied market volatility and expected stock returns. Using both cross-sectional and time series analysis, we...
Persistent link: https://www.econbiz.de/10013015828