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Korsaye, Sofonias Alemu - 2022

I develop a theoretical framework to identify investors' subjective beliefs that are jointly consistent with survey expectations and asset prices in markets where investors face trading frictions. To quantify the deviation of investors' beliefs from Rational Expectations (RE), I provide a metric...

Persistent link: https://www.econbiz.de/10014236026

One-Fund Separation and Uniqueness of Equilibrium in Incomplete Markets with Heterogeneous Beliefs

Won, Dong Chul - 2017

Uniqueness of equilibrium is a relatively unexplored issue in incomplete markets compared with complete markets. This work shows that one-fund separation is sufficient for the uniqueness of equilibrium in a special class of incomplete markets with two agents and two assets. Specifically, it...

Persistent link: https://www.econbiz.de/10012942241

Portfolio Constraints, Differences in Beliefs and Bubbles

Bidian, Florin - 2020

I propose an arbitrage-based theory of bubbles in economies with general portfolio constraints and differences in …

Persistent link: https://www.econbiz.de/10012856797

Expected Equity Returns Should Correlate with Idiosyncratic Risk

Bruno, Giovanni - 2018

law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries … implications of the theory. Time variation in asset ivol causes time variation in the option value of equity that translates into …

Persistent link: https://www.econbiz.de/10012910108

Expectations, Fundamentals, and Asset Returns : Evidence from the Commodity Markets

Beber, Alessandro - 2016

We study the links between expectations, fundamentals, and asset returns using the rich empirical setup offered by commodity markets. We find that survey-based expectations predict future fundamentals, but are not significant predictors of future returns. Expectations of returns are correlated...

Persistent link: https://www.econbiz.de/10012988158

Risk-Neutral Cumulants, Expected Risk Premia, and Future Stock Returns

Wang, Kai - 2018

This paper builds an empirical model to connect option-implied cumulants with expected risk premia through latent risk factors. Expected risk premia on individual stocks are estimated by applying a new partial least squares-based method on risk-neutral cumulants at different orders and various...

Persistent link: https://www.econbiz.de/10012908081

Price, Cultural Dimensions, and the Cross-Section of Expected Stock Returns

Hammerich, Ulrich - 2019

We document a nominal stock price effect that is (like momentum) associated with (national) culture. Using the full spectrum of cultural dimensions proposed by Hofstede et al. and the cross-section of stock returns of 41 countries, we not only show a robust predictive and explanatory power of...

Persistent link: https://www.econbiz.de/10012861754

Forward Return Expectations

Gandhi, Mihir; Gormsen, Niels; Lazarus, Eben - National Bureau of Economic Research - 2023

We measure investors' short- and long-term stock-return expectations using both options and survey data. These expectations at different horizons reveal what investors think their own short-term expectations will be in the future, or forward return expectations. While contemporaneous short-term...

Persistent link: https://www.econbiz.de/10014372444

Model-Free Implied Dependence and the Cross-Section of Returns

Inghelbrecht, Koen; Verdickt, Gertjan; Linders, Daniël; … - 2022

explained by common risk factors – implying that a risk-based theory is not likely an explanation of the result – and is robust …

Persistent link: https://www.econbiz.de/10014236765

Operating cost flexibility and implications for stock returns

Taussig, Roi D. - In: Risks : open access journal 12 (2024) 10, pp. 1-7

This study suggests a new measure for a firm's operating cost flexibility. Flexible firms are less risky and, therefore, require lower stock returns. This analysis of 126,202 firm-year observations from the U.S. cross-section of stock returns finds that the new measure explains a negative...

Persistent link: https://www.econbiz.de/10015130522