This paper studies the effect of new fund flows on investment behavior and the resulting equilibrium price of risk. The Small Fund Industry model shows equilibria with overinvestment in unprofitable and underinvestment in profitable investment opportunities. The Large Fund Industry model derives...

Purpose of this paper was to research portfolio optimization problem on Croatian capital market using Markowitz theory. Research systematically investigated the selection of securities, and defined the importance of using fundamental analysis when selecting the best combination of securities....

The last 15 years has brought forth an explosion of research on consumption-based asset pricing as a leading contender for explaining aggregate stock market behavior. This research has propelled further interest in consumption-based asset pricing, as well as some debate. This chapter surveys the...

A recent literature shows how an increase in volatility reduces leverage. However, in order to explain pro-cyclical leverage it assumes that bad news increases volatility, that is, it assumes an inverse relationship between first and second moments of asset returns. This paper suggests a reason...

This paper presents a new numerical method for solving stochastic general equilibrium models with dynamic portfolio choice over many financial assets. The method can be applied to models where there are heterogeneous agents, time-varying investment opportunity sets, and incomplete asset markets....

This paper analyzes the empirical performance of two alternative ways in which multi-factor models with time-varying risk exposures and premia may be estimated. The first method echoes the seminal two-pass approach advocated by Fama and MacBeth (1973). The second approach extends previous work...

Using a novel multivariate microstructure model and time varying estimation framework we analyse the change in the information structure of the segmented Shanghai A and B share listed stocks after a significant set of regulatory reforms in 2001, nicknamed the 'year of regulation' by...

Developed in the 1950s and 1960s, the core concept of the Markowitz model - the homogenous expectations assumption - is important to capital asset pricing models. The Markowitz Model uses the statistical variance of a stock's price as the measure of its risk and its expected return as the...

We investigate the capability of an equity holding tax to stabilize a VaR regulated financial market. We show that a VaR constraint induces high volatility in a distressed financial market, the phenomenon is not observed in a market with risk averse unregulated traders. A tax on equity holding...

We investigate the effect of trading activity in the Asian emerging markets on the market integration across Asian emerging and major developed markets over the sample period of 1997 to 2009. The empirical evidence confirms that higher trading activity in Asian emerging markets can induce these...