Related papers: Trends and Risk Premia: Update and Additional Plot…
We give a detailed account of correlations between credit sector/quality and treasury curve factors, using the robust framework of the Barclays POINT Global Risk Model. Consistent with earlier studies, we find a strong negative correlation…
We revisit the index leverage effect, that can be decomposed into a volatility effect and a correlation effect. We investigate the latter using a matrix regression analysis, that we call `Principal Regression Analysis' (PRA) and for which…
This paper investigates the time-varying risk-premium relation of the Chinese stock markets within the framework of cross-sectional momentum and contrarian effects by adopting the Capital Asset Pricing Model and the French-Fama three factor…
Different models to study the wealth distribution in an artificial society have considered a transactional dynamics as the driving force. Those models include a risk aversion factor, but also a finite probability of favoring the poorer…
We note a simple mechanism that may at least partially resolve several outstanding economic puzzles, including why the cyclically adjusted price to earnings ratio of the S&P 500 index has been oddly high for the past two decades, why gains…
We review the state of the art of clustering financial time series and the study of their correlations alongside other interaction networks. The aim of this review is to gather in one place the relevant material from different fields, e.g.…
Employing a generalized definition of Pratt (1964) and Arrow's (1965, 1971) probability premium, we introduce a new concept of attitude towards probability. We illustrate in a problem of risk sharing that whether attitude towards…
We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…
Through a novel approach, this paper shows that substantial change in stock market behavior has a statistically and economically significant impact on equity risk premium predictability both on in-sample and out-of-sample cases. In line…
Determination of the correct mix of dividend and retained earnings and its effect on profitability has been a subject of controversy in financial management literature. This paper seeks to contribute to the ongoing debate by examining the…
We develop a penalized two-pass regression with time-varying factor loadings. The penalization in the first pass enforces sparsity for the time-variation drivers while also maintaining compatibility with the no-arbitrage restrictions by…
This paper investigates the benefits of incorporating diversification effects into the pricing process of insurance policies from two different business lines. The paper shows that, for the same risk reduction, insurers pricing policies…
We examine how career concerns influence the behavior and mobility of financial advisers. Drawing on a uniquely comprehensive matched panel that combines employer-employee data with a longstanding national ranking, our study tests…
Researchers are more likely to share notable findings. As a result, published findings tend to overstate the magnitude of real-world phenomena. This bias is a natural concern for asset pricing research, which has found hundreds of return…
The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…
Identifying and exploring emerging trends in the news is becoming more essential than ever with many changes occurring worldwide due to the global health crises. However, most of the recent research has focused mainly on detecting trends in…
This report was originally written as an industry white paper on Hedge Funds. This paper gives an overview to Hedge Funds, with a focus on risk management issues. We define and explain the general characteristics of Hedge Funds, their main…
We show that results from the theory of random matrices are potentially of great interest to understand the statistical structure of the empirical correlation matrices appearing in the study of price fluctuations. The central result of the…
Interest in targeted disease prevention has stimulated development of models that assign risks to individuals, using their personal covariates. We need to evaluate these models, and to quantify the gains achieved by expanding a model with…
Estimating the covariance of asset returns, i.e., the risk model, is a key component of financial portfolio construction and evaluation. Most risk modeling approaches produce a factor model that decomposes the asset variability into two…