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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…
This paper studies the income fluctuation problem with capital income risk (i.e., dispersion in the rate of return to wealth). Wealth returns and labor earnings are allowed to be serially correlated and mutually dependent. Rewards can be…
Market confidence is essential for successful investing. By incorporating multi-market into the evolutionary minority game, we investigate the effects of investor beliefs on the evolution of collective behaviors and asset prices. When there…
This paper investigates how to measure common market risk factors using newly proposed Panel Quantile Regression Model for Returns. By exploring the fact that volatility crosses all quantiles of the return distribution and using penalized…
This paper is concerned with the uniqueness issue of open-loop equilibrium investment strategies of dynamic mean-variance portfolio selection problems with random coefficients. A unified method is developed to treat both the problems with…
We consider a continuous-time game-theoretic model of an investment market with short-lived assets and endogenous asset prices. The first goal of the paper is to formulate a stochastic equation which determines wealth processes of investors…
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…
It is customary that when security prices fully reflect all available information, the markets for those securities are said to be efficient. And if markets are inefficient, investors can use available information ignored by the market to…
We uncover a large and significant low-minus-high rank effect for commodities across two centuries. There is nothing anomalous about this anomaly, nor is it clear how it can be arbitraged away. Using nonparametric econometric methods, we…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
In an equity market model with "Knightian" uncertainty regarding the relative risk and covariance structure of its assets, we characterize in several ways the highest return relative to the market that can be achieved using nonanticipative…
We consider a Black-Scholes market in which a number of stocks and an index are traded. The simplified Capital Asset Pricing Model is the conjunction of the usual Capital Asset Pricing Model, or CAPM, and the statement that the appreciation…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
We provide closed-form market equilibrium formula consolidating informational imperfections and investors beliefs. Based on Merton's model, we characterize the equilibrium expected excess returns vector with incomplete information. We then…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
The variance measures the portfolio risks the investors are taking. The investor, who holds his portfolio and doesn't trade his shares, at the current time can use the time series of the market trades that were made during the averaging…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
In contrast to problems of interference in (exogenous) treatments, models of interference in unit-specific (endogenous) outcomes do not usually produce a reduced-form representation where outcomes depend on other units' treatment status…
This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize…
We study optimal proportional reinsurance and investment strategies for an insurance company which experiences both ordinary and catastrophic claims and wishes to maximize the expected exponential utility of its terminal wealth. We propose…