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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 Finance - Asset Prices Predictability, Equity Premium Puzzle, Volatility Puzzle : The Rational Finance Approach

Rachev, Svetlozar T. - 2020

) The Volatility Puzzle. We offer resolutions of those objections within the rational finance. We do not claim that those …

Persistent link: https://www.econbiz.de/10012842392

Intra-Day Momentum

Komarov, Oleg - 2017

There is limited evidence of intraday predictability both in the cross-section of US stock returns (see Heston et al., 2010) and in the time-series of the aggregate stock market (see Gao et al., 2015). I find that statistical time-series predictability does not imply economic profitability,...

Persistent link: https://www.econbiz.de/10012964682

Using a Mean Changing Stochastic Processes Exit-Entry Model for Stock Market Long-Short Prediction

Lleo, Sébastien; Zhitlukhin, M. V.; Ziemba, William T. - 2021

Stochastic processes is one of the key operations research tools for analysis of complex phenomenon. This paper has a unique application to the study of mean changing models in stock markets. The idea is to enter and exit stock markets like Apple Computer and the broad S&P500 index at good times...

Persistent link: https://www.econbiz.de/10013220323

International Stock Return Predictability : The Role of U.S. Volatility Risk

Deng, Yizhe; Jiang, Fuwei; Wang, Yunqi; Zhou, Ti - 2022

This paper studies the intertemporal relation between U.S. volatility risk and international equity risk premia. We … show that a common volatility risk factor constructed from the option-implied U.S. forward variances positively and … robust to the inclusion of existing domestic and U.S. predictors and alternative U.S. volatility risk proxies. The …

Persistent link: https://www.econbiz.de/10014236052

Option-implied information and predictability of extreme returns

Vilkovz, Grigory; Xiaox, Yan - 2013 - This version: January 28, 2013

We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...

Persistent link: https://www.econbiz.de/10010226098

Variance Risk Premium in Individual Stocks : Aggregating Factor Variance Risk

Pyun, Sungjune - 2020

The risk premium of stocks due to priced variance risk is summarized to two variables -- the stock-specific price of variance risk (the difference between realized and option-implied variance) and the quantity (i.e., how stock prices respond to their variance shocks) of variance risk....

Persistent link: https://www.econbiz.de/10012855216

Time Series Momentum and Reversal : Intraday Information from Realized Semivariance

Liu, Zhenya - 2020

The presence of time series momentum effect has been widely documented in the financial markets across asset classes and countries. We find a predictable pattern of the realized semi-variance to the future individual asset return, especially during the stressed states of time series momentum...

Persistent link: https://www.econbiz.de/10012836027

International tail risk and world fear

Nguyen, Duc Binh Benno; Prokopczuk, Marcel; Wese Simen, … - 2017

We examine the pricing of tail risk in international stock markets. We find that the tail risk of different countries is highly integrated. Introducing a new World Fear index, we find that local and global aggregate market returns are mainly driven by global tail risk rather than local tail...

Persistent link: https://www.econbiz.de/10011751251

Measuring risk information

Smith, Kevin; So, Eric - 2020

We develop a measure of how information events impact investors' perceptions of risk that is broadly applicable and simple to implement. We derive this measure from an option-pricing model where investors anticipate an announcement that simultaneously conveys information on the announcer's...

Persistent link: https://www.econbiz.de/10012244502