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Risk Aversion : Differential Conditions for the Concavity in Transformed Two-Parameter Distributions

Corradin, Fausto; Sartore, Domenico - 2016

The condition of Risk Aversion implies that the Utility Function must be concave. Taking into account the dependence of the Utility Function on the wealth that in turn depends on the return, we consider a return with any type of two-parameter distribution. It is possible to define Risk and...

Persistent link: https://www.econbiz.de/10014124383

On Pricing Kernels, Information and Risk

Wilcox, Diane - 2015

We discuss the finding that cross-sectional characteristic based models have yielded portfolios with higher excess monthly returns but lower risk than their arbitrage pricing theory counterparts in an analysis of equity returns of stocks listed on the JSE. Under the assumption of general...

Persistent link: https://www.econbiz.de/10013034895

Effective Risk Aversion in Thin Risk-Sharing Markets

Anthropelos, Michail - 2019

We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We argue that traders relatively more exposed to the market...

Persistent link: https://www.econbiz.de/10012891032

The Information Risk Drivers - 15 Years of Analysis to Support a Risk Premia Modelling

Mantovani, Guido Max - 2012

Information risk is an endogenous element of the market dynamics that can be independent from contingent levels of market efficiency. Being structural, it may require to be remunerated by a specific risk premia or by returns from specific portfolio strategies. Drivers of information risk are...

Persistent link: https://www.econbiz.de/10013116526

Estimation of risk neutral measure for Polish stock market

Kliber, Paweł - In: E-Finanse : finansowy kwartalnik internetowy 10 (2014) 2, pp. 28-37

In the paper we present the application of risk neutral measure estimation in the analysis of the index WIG20 from Polish stock market. The risk neutral measure is calculated from the process of the options on that index. We assume that risk neutral measure is the mixture of lognormal...

Persistent link: https://www.econbiz.de/10010468362

Reference-Dependent Preferences and the Risk-Return Trade-Off

Wang, Huijun - 2016

This paper studies the cross-sectional risk-return trade-off in the stock market. A fundamental principle in finance is the positive relation between risk and expected return, whereas recent empirical evidence suggests the opposite. Using several intuitive risk measures, we show that the...

Persistent link: https://www.econbiz.de/10013008098

Option Pricing Under Time-Varying Risk-Aversion with Applications to Risk Forecasting

Kiesel, Rüdiger - 2015

We present a new option-pricing model, which explicitly captures the difference in the persistence of volatility under historical and risk-neutral probabilities. The model also allows to capture the empirical properties of pricing kernels, such as time-variation and the typical S-shape. We apply...

Persistent link: https://www.econbiz.de/10013014461

Accounting Information Quality and Systematic Risk

Xing, Xuejing - 2018

Whether and how accounting information quality affects the cost of capital has been a matter of much debate. We contribute to this debate by linking accounting information quality to systematic risk, inspired by recent theoretical discussions. Using the universe of firms jointly listed in the...

Persistent link: https://www.econbiz.de/10012927860

The Earnings Announcement Premium as Uncertainty Aversion : Theory and Evidence

Dicks, David L. - 2020

We argue the earnings announcement premium is a measure of firm-specific uncertainty aversion. Our stylized model shows … earnings announcements, as pure news events, are priced only if investors are uncertainty averse; further, the earnings … announcement return is negatively correlated to future investment only if there is time-varying uncertainty. Consistent with the …

Persistent link: https://www.econbiz.de/10012848502

Short-Selling Risk

Engelberg, Joseph - 2017

Short sellers face unique risks, such as the risk that stock loans become expensive and the risk that stock loans are recalled. We show that short-selling risk affects prices among the cross-section of stocks. Stocks with more short-selling risk have lower returns, less price efficiency, and...

Persistent link: https://www.econbiz.de/10012974072