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LBAs are due to stocks' differential growth rates, because the tested portfolios are traded. Stochastic Portfolio Theory …
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We introduce the beta stochastic volatility model and discuss empirical features of this model and its calibration. This model is appealing because, first, its parameters can be easily understood and calibrated and, second, it produces steeper forward skews, compared to traditional stochastic...
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We derive a nonparametric test for constant (continuous) beta over a fixed interval of time. Continuous beta is defined as the ratio of the continuous covariation between an asset and observable risk factor (e.g., the market return) and the continuous variation of the latter. Our test is based...
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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...
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