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The acceleration effect and gamma factor in asset pricing

Ardila, Diego; Forró, Zalán; Sornette, Didier - 2015

We report strong evidence that changes of momentum, i.e. "acceleration", defined as the first difference of successive … returns, provide better performance and higher explanatory power than momentum. The corresponding Γ-factor explains the … momentum-sorted portfolios entirely but not the reverse. Thus, momentum can be considered an imperfect proxy for acceleration …

Persistent link: https://www.econbiz.de/10011411974

Machine Learning and the Implementable Efficient Frontier

Jensen, Theis Ingerslev; Kelly, Bryan T.; Malamud, Semyon; … - 2022

We propose that investment strategies should be evaluated based on their net-of-trading-cost return for each level of risk, which we term the "implementable efficient frontier." While numerous studies use machine learning return forecasts to generate portfolios, their agnosticism toward trading...

Persistent link: https://www.econbiz.de/10013492674

Asymmetric beta comovement and systematic downside risk

Jondeau, Eric; Zhang, Qunzi - 2014

In this paper, we document evidence that downside betas tend to comove more than upside betas during a financial crisis, but upside betas tend to comove more than the downside betas during financial booms. We find that the asymmetry between Downside-Beta Comovement and Upside-Beta Comovement is...

Persistent link: https://www.econbiz.de/10010442899

Cognitive biases, ambiguity aversion and asset pricing in financial markets

Asparouhova, Elena; Bossaerts, Peter L.; Eguia, Jon; … - 2010 - This version: March 2010

We present a new theory of asset pricing and portfolio choices under asymmetric reasoning, contrast the predictions with those under asymmetric information, and present experimental evidence in favor of our theory. The Efficient Markets Hypothesis and its formal foundation, the Rational...

Persistent link: https://www.econbiz.de/10003970453

Principal portfolios

Kelly, Bryan T.; Malamud, Semyon; Pedersen, Lasse Heje - 2020 - This version: June 8, 2020

We propose a new asset-pricing framework in which all securities' signals are used to predict each individual return. While the literature focuses on each security's own- signal predictability, assuming an equal strength across securities, our framework is flexible and includes...

Persistent link: https://www.econbiz.de/10012271188

Complexity in Factor Pricing Models

Didisheim, Antoine; Ke, Shikun; Kelly, Bryan T.; … - 2023

We theoretically characterize the behavior of machine learning asset pricing models. We prove that expected out-of-sample model performance—in terms of SDF Sharpe ratio and average pricing errors—is improving in model parameterization (or “complexity”). Our results predict that the best...

Persistent link: https://www.econbiz.de/10014254198

On the Estimation of Demand-Based Asset Pricing Models

van der Beck, Philippe - 2022

A growing literature uses portfolio holdings data to quantify the impact of investor demand on equilibrium prices via counterfactual experiments. The key parameter in relating demand and equilibrium prices is investors’ elasticity of demand with respect to the price. Unlike previous studies,...

Persistent link: https://www.econbiz.de/10013406193

Value around the world

Caliskan, Nilufer; Hens, Thorsten - 2013

returns. To test our model empirically, we relate the size of the value premium in 41 countries to the degree of hyperbolic …

Persistent link: https://www.econbiz.de/10009751115

Is the price kernel monotone?

Barone-Adesi, Giovanni; Dall'O, Hakim - 2010

We provide a new method to derive the state price density per unit probability based on option prices and GARCH model. We derive the risk neutral distribution using the result in Breeden and Litzenberger (1978) and the historical density adapting the GARCH model of Barone-Adesi, Engle, and...

Persistent link: https://www.econbiz.de/10003973040

Distance-based metrics : a Bayesian solution to the power and extreme-error problems in asset-pricing tests

Goyal, Amit; He, Zhongzhi; Huh, Sahn-Wook - 2018

(augmented with the momentum factor and/or without the value factor) as the best model and thus highlight the importance of the … momentum factor. In contrast, the traditional alpha-based statistics often lead to inconsistent and counter-intuitive model …

Persistent link: https://www.econbiz.de/10011976958