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Chinco, Alex - 2015

Companies have overlapping exposures to many different features that might plausibly affect their returns, like whether they're involved in a crowded trade, whether they're mentioned in an M&A rumor, or whether their supplier recently missed an earnings forecast. Yet, at any point in time, only...

Persistent link: https://www.econbiz.de/10013032176

Ambiguous Information, Portfolio Inertia, and Excess Volatility

Illeditsch, Philipp K. - 2011

I study the effects of risk and ambiguity (Knightian uncertainty) on optimal portfolios and equilibrium asset prices when investors receive information that is difficult to link to fundamentals. I show that the desire of investors to hedge ambiguity leads to portfolio inertia and excess...

Persistent link: https://www.econbiz.de/10013133587

Ambiguous Information, Risk Aversion, and Asset Pricing

Illeditsch, Philipp K. - 2011

I study the effects of aversion to risk and ambiguity (uncertainty in the sense of Knight (1921)) on the value of the market portfolio when investors receive public information that they find difficult to link to fundamentals and hence treat as ambiguous. I show that small changes in public...

Persistent link: https://www.econbiz.de/10013134524

Shadow Probability Theory for Asset Pricing under Ambiguity

Izhakian, Yehuda (Yud) - 2011

under ambiguity, called Shadow probability theory, a generalization of the Choquet expected utility. In this model … space. Risk and risk attitude, on the other hand, apply to the subordinated space, as in classical expected utility theory … the classical asset pricing theory by incorporating ambiguous probabilities. It proposes a well defined ambiguity premium …

Persistent link: https://www.econbiz.de/10013119880

Are Investors Ever Rational?

Mukherjee, Saptarshi - 2012

Behavioral biases like disposition effect and over-confidence have received much attention as a potential driver of numerous anomalies observed in the markets. Also, it has been argued that information uncertainty tends to exacerbate these biases and induce stronger irrational behavior among...

Persistent link: https://www.econbiz.de/10013099978

Trading Motives in Asset Markets

Wang, Zijian - 2019

I study how trading motives in asset markets affect equilibrium outcomes and welfare. I focus on two types of trading motives -- informational and allocational. I show that while a fully separating equilibrium is the unique equilibrium when trading motives are known, multiple equilibria exist...

Persistent link: https://www.econbiz.de/10012895342

Sequential Learning, Asset Allocation, and Bitcoin Returns

Yae, James; Tian, George Zhe - 2021

For optimal asset allocation, mean-variance investors must learn about the joint dynamics of new and existing asset classes, not only their profitability. Bitcoin's digital gold narrative provides a unique laboratory to test this hypothesis. We find that a decrease in investors' estimate on...

Persistent link: https://www.econbiz.de/10013217407

Asset Pricing with Unknown Consumption and Financial Risk

Gvozdeva, Evgenia - 2011

Do parameter uncertainties regarding different risk factors have symmetric effects on asset prices? In a general equilibrium setting where uncertainties regarding consumption and portfolio returns are of concern to investors but all the structural parameters of consumption and dividend growth...

Persistent link: https://www.econbiz.de/10013128507

Why does return predictability concentrate in bad times?

Cujean, Julien; Hasler, Michael - 2017

We build an equilibrium model to explain why stock return predictability concentrates in bad times. The key feature is that investors use different forecasting models, and hence assess uncertainty differently. As economic conditions deteriorate, uncertainty rises and investors' opinions...

Persistent link: https://www.econbiz.de/10011721618

Behavioral Investment Strategy Matters : A Statistical Arbitrage Approach

Sun, David S. - 2013

In this study, we employ a statistical arbitrage approach to demonstrate that momentum investment strategy tend to work better in periods longer than six months, a result different from findings in past literature. Compared with standard parametric tests, the statistical arbitrage method...

Persistent link: https://www.econbiz.de/10013091434