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Beta risk in the cross-section of equities

Boloorforoosh, Ali; Christoffersen, Peter F.; Fournier, … - 2017

We develop a conditional capital asset pricing model in continuous-time that allows for stochastic beta exposure. When beta co-moves with market variance and the stochastic discount factor (SDF), beta risk is priced, and the expected return on a stock deviates from the security market line. The...

Persistent link: https://www.econbiz.de/10011646407

The Pricing of Market Jumps in the Cross-Section of Stocks and Options

Babaoglu, Kadir - 2018

Market index and individual stock returns exhibit jumps in addition to normal shocks. Equities have exposure to the market and sensitivity to the market is important for explaining equity returns and option prices. I develop a new factor model that explores (i) if a separate beta for market...

Persistent link: https://www.econbiz.de/10012936701

Arbitraging Mispriced Assets with Separation Portfolios to Lessen Total Risk

Apreda, Rodolfo - 2009

This paper expands on a procedure to arbitrage mispriced assets against the benchmark provided by the Security Market … least total risk among other alternative portfolios. Coming next, such arbitrage is dealt directly with one single … separation portfolio, which grants that the total risk linked with the arbitrage portfolio equals the non-systematic risk …

Persistent link: https://www.econbiz.de/10013159871

The contribution of frictions to expected returns

Hirakiy, Kazuhiro; Skiadopoulos, George - 2018

We derive a model-free option-based formula to estimate the contribution of market frictions to expected returns (CFER) within an asset pricing setting. We estimate CFER for the U.S. optionable stocks. We document that CFER is sizable, it predicts stock returns and it subsumes the effect of...

Persistent link: https://www.econbiz.de/10011932555

Arbitrage, Idiosyncratic Risk and the Rationality of Discounts on Closed-End Funds

Gemmill, Gordon - 2011

is an arbitrage cap on its premium resulting from new issues. This censors the distribution of the premium and causes its …

Persistent link: https://www.econbiz.de/10013128561

Chapter 10 Arbitrage, state prices and portfolio theory

Dybvig, Philip H.; Ross, Stephen A. - 2003

equivalence of absence of arbitrage, the existence of a positive linear pricing rule, and the existence of an optimum for some …

Persistent link: https://www.econbiz.de/10014023861

Global Political Risk and Currency Momentum

Filippou, Ilias - 2016

. Our results are robust after controlling for transaction costs, reversals and alternative limits to arbitrage. The global …

Persistent link: https://www.econbiz.de/10013005726

Arbitrage Opportunity, Impossible Frontier, and Logical Circularity in CAPM Equilibrium

Abad, Pharos - 2020

Persistent link: https://www.econbiz.de/10012841039

The pricing of unexpected volatility in the currency market

Lu, Wenna; Copeland, Laurence S.; Xu, Yongdeng - 2021

Many recent papers have investigated the role played by volatility in determining the cross-section of currency returns. This paper employs two time-varying factor models: a threshold model and a Markov-switching model to price the excess returns from the currency carry trade. We show that the...

Persistent link: https://www.econbiz.de/10012591966

Predictability of Currency Carry Trades and Asset Pricing Implications

Bakshi, Gurdip - 2012

This paper studies the time-series predictability of currency carry trades, constructed by selecting currencies to be bought or sold against the U.S. dollar, based on forward discounts. Changes in a commodity index, currency volatility and, to a lesser extent, a measure of liquidity predict...

Persistent link: https://www.econbiz.de/10013113110

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