This paper provides a theoretical explanation for the heteroscedasticity of asset returns. In line with existing empirical results, our model yields an asymmetric relationship between stock return and volatility. Based on the simple assumptions that investors behave according to Prospect Theory...

This paper discusses an empirical analysis of the Expected Downside Risk (EDR) based asset-pricing model on Central and Eastern European and Developed Western European markets. The investigated risk measure applies a nonparametric approach that allows getting rid of any assumption on the...

We introduce an equilibrium asset pricing model, which we build on the relationship between a novel risk measure, the Expected Downside Risk (EDR) and the expected return. On the one hand, our proposed risk measure uses a nonparametric approach that allows us to get rid of any assumption on the...

We implement a market microstructure model including informed, uninformed and heuristic- driven investors, which latter behave in line with loss-aversion and mental accounting. We show that the probability of informed trading (PIN) varies significantly during 2008. In contrast, the probability...

We investigate multi-period investments where the initial capital and its gains are reinvested after each trading period. We point out that holding higher return investments even in the long run can be disadvantageous since, if the mean of a risky investment does not exceed the variance...

In the paper we introduce an empirical approximation of the log-optimal investment strategy that guarantees an almost optimal growth rate of investments. The proposed strategy also considers the effects of portfolio rearrangement costs on growth optimality and advises a suboptimal portfolio for...

The spectral density estimation has had significant importance in empirical research in the past decades, especially in the field of Heteroskedasticity and Autocorrelation Consistent (HAC) covariance matrix estimation and in the random walk theory. The aim of this paper is to find a universal...