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Explaining asset pricing puzzles associated with the 1987 market crash

Benzoni, Luca; Collin-Dufresne, Pierre; Goldstein, Robert S. - 2010

The 1987 market crash was associated with a dramatic and permanent steepening of the implied volatility curve for equity index options, despite minimal changes in aggregate consumption. We explain these events within a general equilibrium framework in which expected endowment growth and economic...

Persistent link: https://www.econbiz.de/10008699179

Liquidity and solvency of a company and the rate of return : an analysis of the Warsaw Stock Exchange

Zalewska, Justyna; Nehrebecka, Natalia - In: Central European economic journal 6 (2019) 53, pp. 199-220

of the capital asset pricing model (CAPM) model and analysed portfolios based on three liquidity ratios and four solvency … ratios, which were computed using the CAPM, Fama–French and Carhart models. The empirical study described in the article … significantly affect the sensitivity of the rate of return on shares to the risk factors expressed in the CAPM, Fama––French and …

Persistent link: https://www.econbiz.de/10012303197

Selection in incomplete markets and the CAPM portfolio rule

Bottazzi, Giulio; Giachini, Daniele - 2020

This paper studies whether, and to what extent, trading in an incomplete competitive market rewards the CAPM portfolio … assets’ expected payoff, and the relation between prices and returns implied by the CAPM does not generally hold. Conversely …

Persistent link: https://www.econbiz.de/10012308904

Principal portfolios

Kelly, Bryan T.; Malamud, Semyon; Pedersen, Lasse Heje - 2020 - This version: June 8, 2020

We propose a new asset-pricing framework in which all securities' signals are used to predict each individual return. While the literature focuses on each security's own- signal predictability, assuming an equal strength across securities, our framework is flexible and includes...

Persistent link: https://www.econbiz.de/10012271188

Predictability and the cross-section of expected returns : a challenge for asset pricing models

Schlag, Christian; Semenischev, Michael; Thimme, Julian - 2020 - This version: August 28, 2020

Many modern macro finance models imply that excess returns on arbitrary assets are predictable via the price-dividend ratio and the variance risk premium of the aggregate stock market. We propose a simple empirical test for the ability of such a model to explain the cross-section of expected...

Persistent link: https://www.econbiz.de/10012271368

Testing for alpha in linear factor pricing models with a large number of securities

Pesaran, M. Hashem; Yamagata, Takashi - 2017

against Sharpe-Lintner CAPM and Fama-French three factor models are found mainly during the recent financial crisis. Also we …

Persistent link: https://www.econbiz.de/10011630054

Why does return predictability concentrate in bad times?

Cujean, Julien; Hasler, Michael - 2017

We build an equilibrium model to explain why stock return predictability concentrates in bad times. The key feature is that investors use different forecasting models, and hence assess uncertainty differently. As economic conditions deteriorate, uncertainty rises and investors' opinions...

Persistent link: https://www.econbiz.de/10011721618

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

Testing for alpha in linear factor pricing podels with a large number of securities

Pesaran, M. Hashem; Yamagata, Takashi - 2017

against Sharpe-Lintner CAPM and Fama-French three factor models are found mainly during the recent financial crisis. Also we …

Persistent link: https://www.econbiz.de/10011646274

Asset prices in general equilibrium with recursive utility and illiquidity induced by transactions costs

Buss, Adrian; Uppal, Raman; Vilkov, Grigory - 2015 - This version: February 2015

In this paper, we study the effect of proportional transaction costs on consumption- portfolio decisions and asset prices in a dynamic general equilibrium economy with a financial market that has a single-period bond and two risky stocks, one of which incurs the transaction cost. Our model has...

Persistent link: https://www.econbiz.de/10012061082