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Common Risk Factors in the Cross Section of Catastrophe Bond Returns

Braun, Alexander; Herrmann, Markus; Hibbeln, Martin Thomas - 2021

Historically, cat bonds have provided high single-digit average annual returns, paired with a low volatility and little correlation to other asset classes. While there is an extensive literature that explains (ex-ante) cat bonds spreads, there is no factor model in the academic literature that...

Persistent link: https://www.econbiz.de/10013216898

Demand for Idiosyncratic Lottery-like Payoffs and the Cross-section of Expected Returns

Ince, Baris; Ozsoylev, Han N. - 2021

Motivated by existing evidence of a preference among investors for stocks with high maximum daily returns, we document that lottery-like payoffs measured by maximum daily returns are almost entirely idiosyncratic. Firm-level cross-sectional regressions and portfolio-sort analyses prove that...

Persistent link: https://www.econbiz.de/10013250542

Asset allocation and risk taking under different interest rate regimes

Hermans, Lieven; Kostka, Thomas; Vassallo, Danilo - 2023

We study the effects of low short-term interest rates on the optimal portfolio allocation in Markowitz portfolios and Risk parity portfolios. We propose a measure of Portfolio Instability, gauging the amount of optimal portfolio shifts needed to respond to exogenous shocks to the expected risk...

Persistent link: https://www.econbiz.de/10014278642

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

Factor Investing, Learning from Prices, and Endogenous Uncertainty in Asset Markets

Dim, Chukwuma; Sangiorgi, Francesco; Vilkov, Grigory - 2021

We study learning and uncertainty under the factor investing paradigm using an endogenous information model with correlated assets. As investors shift attention from firms towards systematic risk factors, stock prices become less informative, increasing systematic uncertainty and incentivizing...

Persistent link: https://www.econbiz.de/10013247042

Portable Beta And Total Portfolio Management

cavaglia, stefano; Fan, John Hua; Wang, Zhenping - 2022

Total Portfolio Management (TPM) typically focuses on maximizing the fund level reward-to-risk ratio across asset classes on a strategic and tactical basis. Recent evidence suggests that style exposures provide a material contribution to the returns reaped by asset owners. We show that the...

Persistent link: https://www.econbiz.de/10013405315

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

On the economic determinants of optimal stock-bond portfolios : international evidence

Conrad, Christian; Stürmer, Karin - 2017 - This version: May 31, 2017

Using a modified DCC-MIDAS specification that allows the long-term correlation component to be a function of multiple explanatory variables, we show that the stock-bond correlation in the US, the UK, Germany, France, and Italy is mainly driven by inflation and interest rate expectations as well...

Persistent link: https://www.econbiz.de/10011745369

Robust block bootstrap panel predictability tests

Westerlund, Joakim; Smeekes, Stephan - 2013

Persistent link: https://www.econbiz.de/10010199463

Robust reverse engineering of cross-sectional returns and improved portfolio allocation performance using the CAPM

Ni, Xiaohui; Malevergne, Yannick; Sornette, Didier; … - 2011

. CAPM, Mean-Variance Portfolio Optimization, Constrained Optimization, Fama-French, Value-Size Portfolios, Dynamical …

Persistent link: https://www.econbiz.de/10009009611