Related papers: Testing the Capital Asset Pricing Model (CAPM) on …
An asset pricing model using long-run capital share growth risk has recently been found to successfully explain U.S. stock returns. Our paper adopts a recursive preference utility framework to derive an heterogeneous asset pricing model…
Taking the European Central Bank unconventional policies as a reference, we suggest a class of Multiplicative Error Models (MEM) taylored to analyze the impact such policies have on stock market volatility. The new set of models, called MEM…
Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…
This research paper explores the performance of Machine Learning (ML) algorithms and techniques that can be used for financial asset price forecasting. The prediction and forecasting of asset prices and returns remains one of the most…
This paper proposes an expected multivariate utility analysis for ESG investors in which green stocks, brown stocks, and a market index are modeled in a one-factor, CAPM-type structure. This setting allows investors to accommodate their…
I demonstrate that with the market return determined by the equilibrium returns of the CAPM, expected returns of an asset are affected by the risks of all assets jointly. Another implication is that the range of feasible market returns will…
Reconstructing patterns of interconnections from partial information is one of the most important issues in the statistical physics of complex networks. A paramount example is provided by financial networks. In fact, the spreading and…
Foundation models - already transformative in domains such as natural language processing - are now starting to emerge for time-series tasks in finance. While these pretrained architectures promise versatile predictive signals, little is…
Generalizing estimates of causal effects from an experiment to a target population is of interest to scientists. However, researchers are usually constrained by available covariate information. Analysts can often collect much fewer…
Automated market makers (AMMs) are pricing mechanisms utilized by decentralized exchanges (DEX). Traditional AMM approaches are constrained by pricing solely based on their own liquidity pool, without consideration of external markets or…
Modern approaches to stock pricing in quantitative finance are typically founded on the 'Black-Scholes model' and the underlying 'random walk hypothesis'. Empirical data indicate that this hypothesis works well in stable situations but, in…
Although not a formal pricing consideration, gap risk or hedging errors are the norm of derivatives businesses. Starting with the gap risk during a margin period of risk of a repurchase agreement (repo), this article extends the…
We investigate entropy as a financial risk measure. Entropy explains the equity premium of securities and portfolios in a simpler way and, at the same time, with higher explanatory power than the beta parameter of the capital asset pricing…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
In this paper, we introduce a novel framework to model the exchange rate dynamics between two intrinsically linked cryptoassets, such as stablecoins pegged to the same fiat currency or a liquid staking token and its associated native token.…
This study investigates whether international equity markets systematically price global macroeconomic risks. The empirical analysis is conducted using monthly excess returns for ten G20 countries over the period 2000-2024. A Dynamic Factor…
We perform econometric tests on a modified Goodwin model where the capital accumulation rate is constant but not necessarily equal to one as in the original model (Goodwin, 1967). In addition to this modification, we find that addressing…
The asset pricing literature emphasizes factor models that minimize pricing errors but overlooks unselected candidate factors that could enhance the performance of test assets. This paper proposes a framework for factor model selection and…
The paper has 2 main goals: 1. We propose a variant of the CAPM based on coherent risk. 2. In addition to the real-world measure and the risk-neutral measure, we propose the third one: the extreme measure. The introduction of this measure…
The paper proposes a new asset pricing model -- the News Embedding UMAP Selection (NEUS) model, to explain and predict the stock returns based on the financial news. Using a combination of various machine learning algorithms, we first…