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Heterogeneity of Investors and Asset Pricing in a Risk-Value World
Franke, Günter; Weber, Martin - C.E.P.R. Discussion Papers - 2003
Portfolio choice and the implied asset pricing are usually derived assuming maximization of expected utility. In this Paper, they are derived from risk-value models that generalize the Markowitz-model. We use a behaviourally based risk measure with an endogenous or exogenous benchmark. If the...
Persistent link: https://www.econbiz.de/10005136483
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Performance Maximization of Actively Managed Funds
Guasoni, Paolo; Huberman, Gur; Wang, Zhenyu - C.E.P.R. Discussion Papers - 2010
Ratios that indicate the statistical significance of a fund’s alpha typically appraise its performance. A growing literature suggests that even in the absence of any ability to predict returns, holding options positions on the benchmark assets or trading frequently can significantly enhance...
Persistent link: https://www.econbiz.de/10008468707
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Improving Portfolio Selection Using Option-Implied Volatility and Skewness
DeMiguel, Victor; Plyakha, Yuliya; Uppal, Raman; … - C.E.P.R. Discussion Papers - 2010
Our objective in this paper is to examine whether one can use option-implied information to improve mean-variance portfolio selection with a large number of stocks, and to document which aspects of option-implied information are most useful for improving the out-of-sample performance of...
Persistent link: https://www.econbiz.de/10008530360
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Carry
Koijen, Ralph; Moskowitz, Tobias J; Pedersen, Lasse Heje; … - C.E.P.R. Discussion Papers - 2013
Any security’s expected return can be decomposed into its “carry” and its expected price appreciation, where carry is a model-free characteristic that can be observed in advance. While carry has been studied almost exclusively for currencies, we find that carry predicts returns both in the...
Persistent link: https://www.econbiz.de/10011083673
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Keynes Meets Markowitz: The Trade-off Between Familiarity and Diversification
Boyle, Phelim; Garlappi, Lorenzo; Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2010
aversion to formalize the idea of an investor’s "familiarity" toward assets. The model shows that when an investor is equally … an investor exhibits different degrees of familiarity across assets, the optimal portfolio depends on (i) the relative … in correlation between assets causes an investor to increase concentration in the assets with which they are familiar …
Persistent link: https://www.econbiz.de/10008468537
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Asset Pricing under Rational Learning about Rare Disasters
Koulovatianos, Christos; Wieland, Volker - C.E.P.R. Discussion Papers - 2011
This paper proposes a new approach for modeling investor fear after rare disasters. The key element is to take into … benchmark. Due to the low frequency of disasters, even an infinitely-lived investor will remain uncertain about the exact …
Persistent link: https://www.econbiz.de/10009201120
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Income Risk, Borrowing Constraints and Portfolio Choice
Guiso, Luigi; Jappelli, Tullio; Terlizzese, Daniele - C.E.P.R. Discussion Papers - 1994
Economic theory suggests that uninsurable income risk, health risk and the expectation of future borrowing constraints can reduce the share of risky assets in a household's portfolio. In fact, if its utility function exhibits decreasing absolute risk aversion and decreasing prudence, a household...
Persistent link: https://www.econbiz.de/10005124154
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Investment, Resolution of Risk, and the Role of Affect
Hopfensitz, Astrid; Krawczyk, Michal; Winden, Frans … - C.E.P.R. Discussion Papers - 2008
This experimental study is concerned with the impact of the timing of the resolution of risk on people’s willingness to take risks, with a special focus on the role of affect. While the importance of anticipatory emotions has so far been only inferred from decisions regarding hypothetical...
Persistent link: https://www.econbiz.de/10005124205
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Portfolio Selection with Parameter and Model Uncertainty: A Multi-Prior Approach
Garlappi, Lorenzo; Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2005
In this paper, we show how an investor can incorporate uncertainty about expected returns when choosing a mean … investor is neutral to uncertainty, we consider the case where the investor has multiple priors and is averse to uncertainty … features: One, just like the Bayesian model, it is firmly grounded in decision theory. Two, it is flexible enough to allow for …
Persistent link: https://www.econbiz.de/10005124485
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Model Misspecification and Under-Diversification
Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2002
In this Paper we develop a model of intertemporal portfolio choice where an investor accounts explicitly for the … weights of an investor who accounts for model misspecification. We illustrate the model by calibrating it to data on …
Persistent link: https://www.econbiz.de/10005504745