We implement a long-horizon static and dynamic portfolio allocation involving a risk-free and a risky asset. This model is calibrated at a quarterly frequency for ten European countries. We also use maximum-likelihood estimates and Bayesian estimates to account for parameter uncertainty. We find...

Following Levy and Roll [2010], we posit that the market portfolio is the efficient tangent Markowitz portfolio, i.e., it is mean-variance efficient. We then reverse engineer the expected returns and variance terms with constraints imposed by empirical data on a hierarchy of asset baskets. This...

In this paper, we propose a multivariate market model with returns assumed to follow a multivariate normal tempered stable distribution. This distribution, defined by a mixture of the multivariate normal distribution and the tempered stable subordinator, is consistent with two stylized facts...

We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...

Using high-frequency data, we decompose the time-varying beta for stocks into beta for continuous systematic risk and beta for discontinuous systematic risk. Estimated discontinuous betas for S&P500 constituents between 2003 and 2011 generally exceed the corresponding continuous betas. We...

I provide evidence that risks in macroeconomic fundamentals contain valuable information about bond risk premia. I extract factors from a set of quantile-based risk measures estimated for US macroeconomic variables and document that they account for up to 31% of the variation in excess bond...

Hedge Fund returns are often highly serially correlated mainly due to illiquidity exposures given that investments in such securities tend to be inactively traded and associated market prices are not always readily available. Following that, observed returns of such alternative investments tend...