Suppose a fund manager uses predictors in changing port-folio allocations over time. How does predictability translate into portfolio decisions? To answer this question we derive a new model within the Bayesian framework, where managers are assumed to modulate the systematic risk in part by...

Using a Bayesian time‐varying beta model, we explore how the systematic risk exposures of hedge funds vary over time conditional on some exogenous variables that managers are assumed to use in changing their trading strategies. In such a setting, we impose a structure on fund returns, betas...

Suppose a fund manager uses predictors in changing portfolio allocations over time. How does predictability translate into portfolio decisions? To answer this question we derive a new model within the Bayesian framework, where managers are assumed to modulate the systematic risk in part by...

The LP formula is based upon the substitution of the exogenous risk aversion hypothesis by a credit equilibrium hypothesis. This leads to a trade-off between expected blue-sky return – the expected return excluding default scenarios – and extreme risk estimated from scenarios leading to...

This paper generalizes the Bollerslev and Zhang (2003) approach for the estimation of loadings of asset pricing models using "realized" measures and co-measures of risk. We propose here to extend this approach by including higher-moments in asset pricing models. Estimations are conducted using...