This article implements the minimum variance frontier for the stochastic discount factor, according to both Hansen and Jagannathan (1991) and Cochrane and Hansen (1992), for the Brazilian stock market. Two approaches are considered in terms of equity returns and equity premium, respectively, the...

Alpha, or outperformance of a benchmark, can be generated in many ways within a portfolio. It can be created by picking the top hedge fund managers, or by capturing the illiquidity premium via alternative assets. Venture capital is a major source of alpha for long-term investors. Alpha can also...

This paper analyzes how individuals value the two main payout options of retirement wealth accrued in a pension plan: a lifelong income stream offered via an annuity or as a lumpsum. A better knowledge of the drivers behind the financial valuation of pension options contributes to the...

In this paper, we analyze how tail risk impacts both asset prices and the optimal asset allocation. For this purpose, we consider an equilibrium model with investors exhibiting an empirically well-justifiable decreasing relative risk aversion (DRRA) and different investment horizons. In contrast...

In financial economics, numerous theoretical models explain the relationship between investment risk and return in the capital market, one of the most common being the Capital Asset Pricing Model (CAPM). After reviewing the literature in this area, this study discusses the theoretical background...

In a passive investing strategy through indexation, the portfolio performance will depend largely on the ability to choose the best index. In this paper, we study the performance of four of the main stock indices in Mexico with the intention of selecting the best one for a passive investing...

This paper examines the long-term dependence between the Polish and German stock markets in terms of industry beta risk estimates according to the Capital Asset Pricing Model (CAPM). The main objective of this research is to compare the Polish and German beta parameters of five Polish and three...

The influence of liquidity costs and liquidity risk on asset returns has been proven by several empirical studies. This paper analyzes the conditional version of the liquidity-adjusted capital asset pricing model and shows that betas significantly vary over different economic regimes and that...

We analyze the stock prices of the S&P market from 1987 to 2012 with the covariance matrix of the firm returns determined in time windows of several years. The eigenvector belonging to the leading eigenvalue (market) exhibits in its long term time dependence a phase transition with an order...

We present an empirical study focusing on the estimation of a fundamental multi-factor model for a universe of European stocks. Following the approach of the BARRA model, we have adopted a cross-sectional methodology. The proportion of explained variance ranges from 7.3% to 66.3% in the weekly...