by an unobservable continuous-time finite state Markov chain. Using the classical stochastic filtering theory, we reduce …

This paper investigates whether multivariate crash risk (MCRASH), defined as exposure to extreme realizations of … returns than stocks with low MCRASH. The premium is not explained by linear factor exposures, alternative downside risk … measures or stock characteristics. Extending market-based definitions of crash risk to other well-established factors helps to …

Risk decomposition is a standard tool for analyzing investment portfolio risk. The portfolio is divided into notional … parts—e.g., individual securities, holdings by sector or region, factor exposures—whose contributions to net risk are … composition changes with price movement and estimates have errors. Since behavior only in the direction of net risk is counted …

portfolios that help mitigating climate change risk but at the same time enable harvesting well-established return drivers such …

. Then we propose to reduce the estimation risk of expected returns and the variance-covariance matrix of asset returns by … when the estimation risk is large …

's preference by a power utility function leading to constant relative risk aversion. We show that the loss in expected utility is … analytical results that show how the sparsity of the constrained portfolio depends on the coefficient of relative risk aversion …>-norm for each level of relative risk aversion …

uncertainty aversion parameter, which measures the investor's preference for robustness using econometric theory. I derive a …

Inter-temporal risk parity is a strategy that rebalances risky assets and cash in order to target a constant level of … ex-ante risk over time. When applied to equities and compared to a buy-and-hold portfolio it is known to improve the … Sharpe ratio and reduce drawdowns. We apply inter-temporal risk parity strategies to factor investing, namely value and …

We introduce a new meaure of risk appetite in financial markets, based on the cross sectional behavior of excess … returns. Turning them into probabilities through a Markov Switching model, we define one global risk appetite measure as the … cross-sectional average of the individual probabilities for each asset to be in a "risk appetite" regime. Given the …

study how these endogenous effects influence traditional measures of risk-adjusted performance. We show that structural …