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Brodie, Joshua; Daubechies, Ingrid; De Mol, Christine; … - C.E.P.R. Discussion Papers - 2007

The Markowitz mean-variance optimizing framework has served as the basis for modern portfolio theory for more than 50 years. However, efforts to translate this theoretical foundation into a viable portfolio construction algorithm have been plagued by technical difficulties stemming from the...

Persistent link: https://www.econbiz.de/10005504227

Solving Heterogeneous-Agent Models with Parameterized Cross-Sectional Distributions

Algan, Yann; Allais, Olivier; Den Haan, Wouter - C.E.P.R. Discussion Papers - 2007

disadvantages of the prevailing algorithm that strongly relies on simulation techniques and is easier to implement than existing … possible to avoid Monte Carlo integration. The paper also develops a new simulation procedure that not only avoids cross … finite number of agents. This procedure can help to improve the efficiency of the most popular algorithm in which simulation …

Persistent link: https://www.econbiz.de/10005114163

The Supermodular Stochastic Ordering

Meyer, Margaret A; Strulovici, Bruno - C.E.P.R. Discussion Papers - 2013

In many economic applications involving comparisons of multivariate distributions, supermodularity of an objective function is a natural property for capturing a preference for greater interdependence. One multivariate distribution dominates another according to the `supermodular stochastic...

Persistent link: https://www.econbiz.de/10011083601

Buffett’s Alpha

Frazzini, Andrea; Kabiller, David; Pedersen, Lasse Heje - C.E.P.R. Discussion Papers - 2013

Berkshire Hathaway has realized a Sharpe ratio of 0.76, higher than any other stock or mutual fund with a history of more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha becomes insignificant when controlling for exposures to...

Persistent link: https://www.econbiz.de/10011083650

Is Historical Cost Accounting a Panacea? Market Stress, Incentive Distortions, and Gains Trading

Ellul, Andrew; Jotikasthira, Chotibhak; Lundblad, … - C.E.P.R. Discussion Papers - 2015

We provide new empirical evidence concerning the contentious debate over the use of historical cost (HCA) versus mark-to-market (MTM) accounting in regulating financial institutions. These accounting rules, through their interactions with capital regulations, alter financial institutions’...

Persistent link: https://www.econbiz.de/10011186617

A Model of Credit Risk, Optimal Policies and Asset Prices

Basak, Suleyman; Shapiro, Alex - C.E.P.R. Discussion Papers - 2002

This Paper studies the optimal policies of borrowers (firms or individuals) who may default subject to default costs, and analyses the asset pricing implications. Borrowers defaulting under adverse economic conditions may, despite incurring default costs, emerge as wealthier than non-borrowers...

Persistent link: https://www.econbiz.de/10005788927

Investors' horizons and the Amplification of Market Shocks

Cella, Cristina; Ellul, Andrew; Giannetti, Mariassunta - C.E.P.R. Discussion Papers - 2010

After negative shocks, investors with short trading horizons are inclined or forced to sell their holdings to a larger extent than investors with longer trading horizons. This may amplify the effects of market-wide shocks on stock prices. We test the relevance of this mechanism by exploiting the...

Persistent link: https://www.econbiz.de/10008683532

Personal Pensions with Risk sharing: Affordable, Adequate and Stable Private Pensions in Europe

Bovenberg, A Lans; Nijman, Theo E - C.E.P.R. Discussion Papers - 2015

Private pension provision faces the challenging task of providing stable income streams during retirement. The challenge has increased markedly in the last decades due to volatile financial markets, falling interest rates and the withdrawal of employers and external insurers as risk bearers of...

Persistent link: https://www.econbiz.de/10011252616

Information Aggregation in a DSGE Model

Hassan, Tarek; Mertens, Thomas M. - C.E.P.R. Discussion Papers - 2014

We introduce the information microstructure of a canonical noisy rational expectations model (Hellwig, 1980) into the framework of a conventional real business cycle model. Each household receives a private signal about future productivity. In equilibrium, the stock price serves to aggregate and...

Persistent link: https://www.econbiz.de/10011083546

Incomplete-Market Equilibria Solved Recursively on an Event Tree

Dumas, Bernard J; Lyasoff, Andrew - C.E.P.R. Discussion Papers - 2009

We develop a method that allows one to compute incomplete-market equilibria routinely for Markovian equilibria (when they exist). The main difficulty to be overcome arises from the set of state variables. There are, of course, exogenous state variables driving the economy but, in an incomplete...

Persistent link: https://www.econbiz.de/10005124234