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Ambiguous Information, Portfolio Inertia, and Excess Volatility

Illeditsch, Philipp K. - 2011

ambiguity leads to portfolio inertia and excess volatility. Specifically, when news is surprising, then investors may not react … volatility …

Persistent link: https://www.econbiz.de/10013133587

Dynamic option-based strategies under downside loss averse preferences

Jalal, Amine (contributor) - 2007

loss aversion. The problem is solved in closed form when the stock market exhibits stochastic volatility and jumps. The …

Persistent link: https://www.econbiz.de/10003550865

An anatomy of the equity premium

Schneider, Paul - 2016

This paper introduces a model-free decomposition of S&P 500 forward market index returns in terms of realized and implied dispersion, downside, and tail risk using option portfolios. The decomposition lends itself by construction to learn about the different sources of risk in the market return,...

Persistent link: https://www.econbiz.de/10011507822

Liquidation with self-exciting price impact

Cayé, Thomas; Muhle-Karbe, Johannes - 2014

We study optimal execution with "self-exciting" price impact, where persistent trades not only incur price impact but also increase the execution costs for successive orders. This model is motivated by an equilibrium between fundamental sellers, market makers, and end users. For risk-neutral...

Persistent link: https://www.econbiz.de/10011293738

Equilibrium driven by discounted dividend volatility

Cvitanić, Jakša; Malamud, Semyon - 2009

We derive representations for the stock price drift and volatility in the equilibrium of agents with arbitrary …, intrinsic characteristic of the aggregate dividend process that we call the "rate of discounting volatility" and show that, in … equilibrium, the size of market price of risk is determined by the market price of discounted dividend volatility (DDV …

Persistent link: https://www.econbiz.de/10003971106

Ambiguity Aversion and Asset Price Dynamics

Piccotti, Louis R. - 2019

We derive the equilibrium asset expected returns when there is ambiguity in asset expected returns, as well as ambiguity in asset return variances. In our model, ambiguity risk is systematic in nature and is non-diversifiable. Under regularity conditions, expected asset returns are linearly...

Persistent link: https://www.econbiz.de/10012902825

Uncertain growth, ambiguity aversion and asset prices

Liu, Hening - 2011

' fluctuating beliefs induce countercylical variation in equity premium and in the expected volatility of returns, and moreover … volatility clusterng and persistence; and (3) Bayesian learning itself is unable to generate a significant and positive risk …

Persistent link: https://www.econbiz.de/10009411461

Multivariate crash risk

Chabi-Yo, Fousseni; Huggenberger, Markus; Weigert, Florian - 2019 - This version: February 2019

This paper investigates whether multivariate crash risk is priced in the cross- section of expected stock returns. Motivated by a theoretical asset pricing model, we capture the multivariate crash risk of a stock by a combined measure based on its expected shortfall and its multivariate lower...

Persistent link: https://www.econbiz.de/10011993538

Does smooth ambiguity matter for asset pricing?

Gallant, A. Ronald; Jahan-Parvar, Mohammad R.; Liu, Hening - 2018

-varying volatility are preferred to the long-run risk model. We analyze asset pricing implications of the estimated models …

Persistent link: https://www.econbiz.de/10011780610

Equilibrium Asset Pricing with Epstein-Zin and Loss-Averse Investors

Guo, Jing - 2016

We study multi-period equilibrium asset pricing in an economy with Epstein-Zin (EZ-) agents whose preferences for consumption are represented by recursive utility and with loss averse (LA-) agents who derive additional utility of gains and losses and are averse to losses. We propose an...

Persistent link: https://www.econbiz.de/10013004613