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Pricing Model Complexity : The Case for Volatility-Managed Portfolios

Clark, Brian J.; Siddique, Akhtar R.; Simaan, Majeed - 2023

AI/ML models are used for many financial applications ranging from portfolio selection to efficient credit allocation. However, the drawback to applying these models in practice is that performance (i.e., predictive power) is generally inversely related to model complexity. In this chapter, we...

Persistent link: https://www.econbiz.de/10014255357

Mortality, Mutual Fund Flows, and Asset Prices

Kumar, Alok; Rantala, Ville; Rizzi, Claudio - 2022

Motivated by the observation that elderly liquidate their mutual fund holdings regularly, we examine whether mortality patterns have a predictable impact on aggregate mutual fund flows and asset prices. Our key conjecture is that periods with high mortality rates would be associated with higher...

Persistent link: https://www.econbiz.de/10014258653

Stock profiling using time-frequency-varying systematic risk measure

Mestre, Roman - In: Financial innovation : FIN 9 (2023) 1, pp. 1-29

(CAPM) framework. The dynamic of systematic risk across time and frequency is analyzed to investigate stock risk … different asset allocation. We conclude that the standard CAPM assumes short-run investment. Then, investors should consider … time-frequency CAPM to perform systematic risk analysis and portfolio allocation. …

Persistent link: https://www.econbiz.de/10014289044

The Fama and French Three-Factor Model and Leverage : Compatibility with the Modigliani and Miller Propositions

Dempsey, Michael J. - 2009

Ross's (1976) arbitrage pricing theory (APT) (FF, 1993, 1994, 1995, 1996). Such claims however are compromised by the …

Persistent link: https://www.econbiz.de/10014210218

On the (Almost) Stochastic Dominance of Cryptocurrency Factor Portfolios & Implications for Cryptocurrency Asset Pricing

Han, Weihao; Newton, David; Platanakis, Emmanouil; … - 2022

Cryptocurrency returns are highly non-normal, casting doubt on the standard performance metrics. We apply almost stochastic dominance (ASD), which does not require any assumption about the return distribution or degree of risk aversion. From 29 long-short cryptocurrency factor portfolios, we...

Persistent link: https://www.econbiz.de/10014088443

Ambiguity Aversion and the Arbitrage Pricing Theory

Polkovnichenko, Valery - 2010

We consider a linear factor APT model and assume that agents are ambiguity averse with respect to payoffs of arbitrage portfolios. In contrast to the standard result, pricing errors need not converge to zero in the limit as the number of assets goes to infinity. Even in the case of exact factor...

Persistent link: https://www.econbiz.de/10013142098

Stochastic Implied Rates of Return, Portfolio Optimization, and the Equity Premium Puzzle

Breuer, Wolfgang - 2013

We show analytically under quite general conditions that time-varying implied rates of return based on analysts' earnings forecasts are only a downward biased estimator for future expected one-period returns and therefore not suited for computing market risk premia in order to resolve the equity...

Persistent link: https://www.econbiz.de/10013095127

Long-horizon asset and portfolio returns revisited : evidence from US markets

Tri Hoang - In: Cogent business & management 10 (2023) 2, pp. 1-16

This study revisits the widely used assumptions in long-term asset allocation: the normal distribution of long-horizon returns and the negligible impacts of estimation errors on the expected returns. This study uses the innovative simulation method of Fama and French (2018) for horizons of up to...

Persistent link: https://www.econbiz.de/10014503297

Data envelopment analysis and multifactor asset pricing models

Solórzano-Taborga, Pablo; Alonso-Conde, Ana Belén; … - In: International Journal of Financial Studies : open … 8 (2020) 2/24, pp. 1-18

Recent literature shows that market anomalies have significantly diminished, while research on market factors has largely improved the performance of asset pricing models. In this paper we study the extent to which data envelopment analysis (DEA) techniques can help improve the performance of...

Persistent link: https://www.econbiz.de/10012239304

Is idiosyncratic risk ignored in asset pricing: Sri Lankan evidence?

Maiti, Moinak - In: Future Business Journal 5 (2019) 5, pp. 1-12

The present study focused on one of the important South Asian nations-Sri Lanka-to examine the role of idiosyncratic volatility in asset prices. A four-factor model with idiosyncratic volatility was designed for capturing the market, size, value and idiosyncratic risk yields better than Fama and...

Persistent link: https://www.econbiz.de/10012137461