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Two-fund separation in dynamic general equilibrium

Schmedders, Karl - In: Theoretical economics : TE ; an open access journal in … 2 (2007) 2, pp. 135-161

This paper examines the two-fund separation paradigm in the context of an infinite-horizon general equilibrium model with dynamically complete markets and heterogeneous consumers with time- and state-separable utility functions. With the exception of the dynamic structure, we maintain the...

Persistent link: https://www.econbiz.de/10011702563

Mean Swap Variance, Portfolio Thoery and Asset Pricing

Chow, Victor - 2018

the classical MV portfolio theory and the CAPM, is consistent with expected utility maximization for all risk …

Persistent link: https://www.econbiz.de/10012934044

Pricing Implications of Clearing a Skewed Asset from the Market

Goulding, Christian L. - 2018

expected returns. The theory generates several new predictions about the cross section of expected stock returns, for which I …

Persistent link: https://www.econbiz.de/10012934969

A Macroeconomic Hedge Portfolios and the Cross-Section of Stock Returns

Renz, Maximilian - 2018

This paper proposes a zero-investment portfolio that can be used to hedge against unexpected changes in the state of the economy. The so-called “macroeconomic hedge portfolio” (MHP) is formed based on a stock's hedging ability, which we derive from a stock's price reaction to important...

Persistent link: https://www.econbiz.de/10012936099

Diffusing Explosive Portfolio Performance Evaluation of High Frequency Traders

Charles-Cadogan, G. - 2018

Several analysts report explosive annualized Sharpe Ratios (ASRs) for investment portfolio performance evaluation of high frequency traders (HFTers) ranging from 4.3 to 5,000. This suggests that the profitability of HFT is much higher than that of other actively managed portfolios. In highly...

Persistent link: https://www.econbiz.de/10012937216

New Evidence on Conditional Factor Models

Cooper, Ilan - 2018

We estimate conditional multifactor models over a large cross-section of stock returns matching 25 CAPM anomalies …

Persistent link: https://www.econbiz.de/10012937406

Investing in the Beta Space

Pereiro, Luis E. - 2019

The beta space is a powerful way to map the investment strategies of semi-diversified investors. Three metrics define the beta space: regular or exogenous betas (x-βs), linked to macroeconomic cycles; endogenous betas (n-βs), related to innovation hazards; and a combination of the two — the...

Persistent link: https://www.econbiz.de/10012903983

A Demand System Approach to Asset Pricing

Koijen, Ralph S. J. - 2019

We develop an asset pricing model with flexible heterogeneity in asset demand across investors, designed to match institutional and household holdings. A portfolio choice model implies characteristics-based demand when returns have a factor structure and expected returns and factor loadings...

Persistent link: https://www.econbiz.de/10012904578

Internal Valuation of Assets with Liquidity Risk

Nauta, Bert-Jan - 2019

The inclusion of funding costs in the valuation of derivatives resulting in the so-called funding valuation adjustment (FVA) is a topic of intense debate, model development, and research. One issue with standard formulations of FVA is that it is the same for liquid and illiquid assets. Even if...

Persistent link: https://www.econbiz.de/10012905080

The Price of Risk : From Modern Portfolio Theory to Leveraged Portfolio Theory

Le Marois, Olivier - 2019

The Modern Portfolio Theory (MPT) has been the cornerstone of the asset allocation for over 40 years. In the past …, such as the recent sub-prime crisis. The proposed Leveraged Portfolio Theory (LPT) removes the most fundamental axiom of … distribution for assets return, we obtain the classical CAPM beta in LPT framework. We show that extreme risk underestimation by …

Persistent link: https://www.econbiz.de/10012905661