On pricing kernels, information and risk
Pricing of Securities
2016-02-18 v2 General Finance
Abstract
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 no-arbitrage conditions, we argue that evidence in favour of characteristic based pricing implies that information is more likely assimilated by means of nonlinear pricing kernels for the markets considered.
Keywords
Cite
@article{arxiv.1310.4067,
title = {On pricing kernels, information and risk},
author = {D. L. Wilcox and T. J. Gebbie},
journal= {arXiv preprint arXiv:1310.4067},
year = {2016}
}
Comments
20 pages, 3 figures, 1 table