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Systemic risk is commonly used to describe the possibility of a series of correlated defaults among financial institutions - typically banks - that occur over a short period of time, often caused by a single major event. However, since the collapse of Long Term Capital Management in 1998, it has...
Persistent link: https://www.econbiz.de/10012736853
Typical value-at-risk (VaR) calculations involve the probabilities of extreme dollar losses, based on the statistical distributions of market prices. Such quantities do not account for the fact that the same dollar loss can have two very different economic valuations, depending on business...
Persistent link: https://www.econbiz.de/10012743616
We investigate several possible links between psychological factors and trading performance in a sample of 80 anonymous day-traders. Using daily emotional-state surveys over a five-week period as well as personality inventory surveys, we construct measures of personality traits and emotional...
Persistent link: https://www.econbiz.de/10012714739
A longstanding controversy in economics and finance is whether financial markets are governed by rational forces or by emotional responses. We study the importance of emotion in the decisionmaking process of professional securities traders by measuring their physiological characteristics, e.g.,...
Persistent link: https://www.econbiz.de/10012715019
We derive an intertemporal capital asset pricing model with multiple assets and heterogeneous investors, and explore its implications for the behavior of trading volume and asset returns. Assets contain two types of risks: market risk and the risk of changing market conditions. We show that...
Persistent link: https://www.econbiz.de/10012722140
We propose a dynamic equilibrium model of asset prices and trading volume with heterogeneous agents fixed transactions costs. We show that even small fixed costs can give rise to large quot;no-tradequot; regions for each agent's optimal trading policy and a significant illiquidity discount in...
Persistent link: https://www.econbiz.de/10012722165
A key result of the Capital Asset Pricing Model (CAPM) is that the market portfolio - the portfolio of all assets in which each asset's weight is proportional to its total market capitalization - lies on the mean-variance efficient frontier, the set of portfolios having mean-variance...
Persistent link: https://www.econbiz.de/10012706970
During the week of August 6, 2007, a number of quantitative long/short equity hedge funds experienced unprecedented losses. It has been hypothesized that a coordinated deleveraging of similarly constructed portfolios caused this temporary dislocation in the market. Using the simulated returns of...
Persistent link: https://www.econbiz.de/10012706987
We derive an intertemporal capital asset pricing model with multiple assets and heterogeneous investors, and explore its implications for the behavior of trading volume and asset returns. Assets contain two types of risks: market risk and the risk of changing market conditions. We show that...
Persistent link: https://www.econbiz.de/10012787563
Implicit in the prices of traded financial assets are Arrow-Debreu prices or, with continuous states, the state-price density (SPD). We construct a nonparametric estimator for the SPD implicit in option prices and derive its asymptotic sampling theory. This estimator provides an arbitrage-free...
Persistent link: https://www.econbiz.de/10012788348