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Market Instability, Investor Sentiment, and Probability Judgment Error in Index Option Prices

Charles-Cadogan, G. - 2021

How do financial markets switch from states of optimism to pessimism and vice versa? Given that a financial market is currently stable, what is the probability that it will become unstable and crash? We answer those questions in the context of a natural experiment with risk sources of...

Persistent link: https://www.econbiz.de/10013227151

The Curious Case of Negative Volatility

Merkle, Christoph - 2018

In a panel survey of brokerage clients in the United Kingdom, participants mostly perceive their own portfolio as no more volatile than the market portfolio. Taking into account observed portfolio betas, this implies a belief in very low idiosyncratic portfolio volatility, which is even negative...

Persistent link: https://www.econbiz.de/10012935515

Steadfast, Greedy, or Fearful? Strategies for Responding to Extreme Market Volatility

White, James - 2020

March 2020 packed 2 ½ years of normal U.S. stock market volatility into one month, making it the most volatile month on record. Daily variability clocked in at 6%, six times higher than the average over the past 90 years. How should an investor respond to such volatility? In this article we...

Persistent link: https://www.econbiz.de/10012832242

When Vegas Comes to Wall Street : Associations Between Stock Price Volatility and Trading Frequency Among Gamblers

Weiss-Cohen, Leonardo; Newall, Philip; Bart, Yakov; … - 2023

Previous research has associated levels of disordered gambling symptomology with stock market trading frequency and high-risk investments. We build on these studies via an incentivized experiment, in which we examine how manipulated levels of market volatility affected trading frequency....

Persistent link: https://www.econbiz.de/10014349545

Explosive oil prices

Gronwald, Marc - 2013

This paper deals with three aspects of spectacular oil price episodes such as the one witnessed in 2008. First, the concept of temporary explosiveness is proposed as an empirical method for capturing this type of behavior. The application of a recently proposed recursive unit root test shows...

Persistent link: https://www.econbiz.de/10009786017

Asset pricing with horizon-dependent risk aversion

Andries, Marianne; Eisenbach, Thomas M.; Schmalz, Martin C. - 2014

We study general equilibrium asset prices in a multi-period endowment economy when agents' risk aversion is allowed to depend on the maturity of the risk. We find horizon-dependent riskaversion preferences generate a decreasing term structure of risk premia if and only if volatility is...

Persistent link: https://www.econbiz.de/10010439624

On Thin Ice : Risk, Return and Crash

Rötheli, Tobias F. - 2017

This paper describes results from a new experiment studying determinants and effects of economic risk-taking. In each session four subjects choose three slots for ice fishing on their portion of a frozen lake. The farther out on the lake the higher are the returns but also the higher is the risk...

Persistent link: https://www.econbiz.de/10012968931

What is the investment loss due to uncertainty?

Panagiotidis, Theodore; Printzis, Panagiotis - 2019

We investigate the effect of uncertainty on investment. We employ a unique dataset of 25000 Greek firms' balance sheets … uncertainty. The investment performance of 14 sectors is examined within a dynamic investment model. Robust GMM estimates of the … investment rate model reveal a high degree of heterogeneity among these sectors. Overall uncertainty affects negatively …

Persistent link: https://www.econbiz.de/10012063228

Two New Risk Metrics : Liquidity Asian Put VaR(TM) and Shortfall(TM) to LIQUIDATION Based on Tail Volatilities & Correlations 'The Need for New Valuation, Risk and Policy Making Models'

Crousillat, Cesar - 2017

This paper derives two new improved risk metrics LAPVaR and LAPSF. Traditional VaRDeltaNormal valuation exaggerates market and liquidity risks to the point it could be larger than the actual portfolio value. Put VaR – PVaR – as well as Put Shortfall – PSF – uses option theory to solve...

Persistent link: https://www.econbiz.de/10012962743

Mean-variance relationship and uncertainty

Kim, Jun Sik - In: Journal of derivatives and quantitative studies : … 30 (2022) 1, pp. 23-45

This study investigates the impact of uncertainty on the mean-variance relationship. We find that the stock market …’s expected excess return is positively related to the market’s conditional variances and implied variance during low uncertainty … periods but unrelated or negatively related to conditional variances and implied variance during high uncertainty periods. Our …

Persistent link: https://www.econbiz.de/10012887264