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...

We examine whether commonality in liquidity arises from style investing. We sort stocks into styles along widely-used size and growth dimensions, and show that style-related commonality in liquidity is significant, dominates commonality in liquidity with the rest of the market, and has more than...

This paper is the second in a series of critiques of the assumption that stable economic relations exist between certain "firm characteristics" and expected returns. The paper explains why this is not the case for past returns and provides theoretical, empirical, and simulated evidence that the...

The paper aims at constructing an optimal portfolio by applying Sharpe's single index model of capital asset pricing in different scenarios, one is ex ante stock price bubble scenario and stock price bubble and bubble burst is second scenario. Here we considered beginning of year 2010 as rise of...

Investors have different preferences for portfolio skewness and kurtosis, i.e. return asymmetry and tail fatness. We build up a new equilibrium model with three types of investors whose preferences can be characterized by "MV", "MVS" and "MVSK". (M: Mean V: Variance S: Skewness K: Kurtosis) and...

Maximum drawdown refers to the largest cumulative loss of a portfolio within a given time interval. While it has been used by investment professionals as an important measure of portfolio risk for many years, its nature and its implications for asset pricing have not been well understood. The...

Capital Assets Pricing Model (CAPM) is the widely tested, accepted and rejected model of asset pricing. From its beginning (1964) it has occupied the prime place and still part of the text books on finance in leading business schools. This study is conducted in Pakistani institutional frame work...

This paper studies portfolio choice and pricing in markets in which immediate trading may be impossible. It departs from the literature by removing restrictions on asset holdings, and finds that optimal positions depend significantly and naturally on liquidity: When expected future liquidity is...

In this paper we examine the characteristics and stability of individual stock and portfolio betas of stocks listed in the Istanbul Stock Exchange (ISE) using samples of 500 individual stocks and 500 portfolios of 10 stocks each. We begin with a methodology similar to the basic event study...

Investor sentiment is an important condition for style investing in affecting asset price predictability. We find that style returns have predictive power for future stock returns in high sentiment periods, but not low sentiment periods. The correlation between style returns and stock returns...