The Investment Horizon and Asset Pricing Models

The Investment Horizon and Asset Pricing Models
Author: Kathleen Walsh
Publisher:
Total Pages:
Release: 2015
Genre:
ISBN:

The Life Cycle Hypothesis suggests that the primary motivation for saving is to accumulate resources in order to fund retirement. This suggests that investors have heterogeneous investment horizons, yet many tests of the CAPM assume homogeneous horizons. This paper estimates a time varying heterogeneous investment horizon using over 200 years of demographic data. We test the CAPM and its assumption that the Equity Risk Premium is positive using our estimated investment horizon. We conclude that the CAPM is not violated when tested over a horizon that more accurately reflects investor behavior.

Multi-moment Asset Allocation and Pricing Models

Multi-moment Asset Allocation and Pricing Models
Author: Emmanuel Jurczenko
Publisher: John Wiley & Sons
Total Pages: 258
Release: 2006-10-02
Genre: Business & Economics
ISBN: 0470057998

While mainstream financial theories and applications assume that asset returns are normally distributed and individual preferences are quadratic, the overwhelming empirical evidence shows otherwise. Indeed, most of the asset returns exhibit “fat-tails” distributions and investors exhibit asymmetric preferences. These empirical findings lead to the development of a new area of research dedicated to the introduction of higher order moments in portfolio theory and asset pricing models. Multi-moment asset pricing is a revolutionary new way of modeling time series in finance which allows various degrees of long-term memory to be generated. It allows risk and prices of risk to vary through time enabling the accurate valuation of long-lived assets. This book presents the state-of-the art in multi-moment asset allocation and pricing models and provides many new developments in a single volume, collecting in a unified framework theoretical results and applications previously scattered throughout the financial literature. The topics covered in this comprehensive volume include: four-moment individual risk preferences, mathematics of the multi-moment efficient frontier, coherent asymmetric risks measures, hedge funds asset allocation under higher moments, time-varying specifications of (co)moments and multi-moment asset pricing models with homogeneous and heterogeneous agents. Written by leading academics, Multi-moment Asset Allocation and Pricing Models offers a unique opportunity to explore the latest findings in this new field of research.

Portfolio Selection and Asset Pricing

Portfolio Selection and Asset Pricing
Author: Shouyang Wang
Publisher: Springer Science & Business Media
Total Pages: 260
Release: 2012-12-06
Genre: Business & Economics
ISBN: 3642559344

In our daily life, almost every family owns a portfolio of assets. This portfolio could contain real assets such as a car, or a house, as well as financial assets such as stocks, bonds or futures. Portfolio theory deals with how to form a satisfied portfolio among an enormous number of assets. Originally proposed by H. Markowtiz in 1952, the mean-variance methodology for portfolio optimization has been central to the research activities in this area and has served as a basis for the development of modem financial theory during the past four decades. Follow-on work with this approach has born much fruit for this field of study. Among all those research fruits, the most important is the capital asset pricing model (CAPM) proposed by Sharpe in 1964. This model greatly simplifies the input for portfolio selection and makes the mean-variance methodology into a practical application. Consequently, lots of models were proposed to price the capital assets. In this book, some of the most important progresses in portfolio theory are surveyed and a few new models for portfolio selection are presented. Models for asset pricing are illustrated and the empirical tests of CAPM for China's stock markets are made. The first chapter surveys ideas and principles of modeling the investment decision process of economic agents. It starts with the Markowitz criteria of formulating return and risk as mean and variance and then looks into other related criteria which are based on probability assumptions on future prices of securities.

Asset Pricing

Asset Pricing
Author: Bing Cheng
Publisher: World Scientific
Total Pages: 91
Release: 2008
Genre: Business & Economics
ISBN: 9812832505

Modern asset pricing models play a central role in finance and economic theory and applications. This book introduces a structural theory to evaluate these asset pricing models and throws light on the existence of Equity Premium Puzzle. Based on the structural theory, some algebraic (valuation-preserving) operations are developed in asset spaces and pricing kernel spaces. This has a very important implication leading to practical guidance in portfolio management and asset allocation in the global financial industry. The book also covers topics, such as the role of over-confidence in asset pricing modeling, relationship of the portfolio insurance with option and consumption-based asset pricing models, etc.

Portfolio Selection and Asset Pricing: Models of Financial Economics and Their Applications in Investing

Portfolio Selection and Asset Pricing: Models of Financial Economics and Their Applications in Investing
Author: Erol Hakanoglu
Publisher: McGraw-Hill Education
Total Pages: 320
Release: 2022-04-05
Genre: Business & Economics
ISBN: 9781264270156

Top experts from PIMCO deliver a uniquely comprehensive guide for sophisticated investors and advanced graduate students—covering everything from financial mathematics to the practical realities of asset allocation and pricing Investors like you typically have a choice to make when seeking guidance for portfolio selection—either a book of practical, hands-on approaches to their craft or an academic tome of theories and mathematical formulas. Portfolio Selection and Asset Pricing strikes the right balance with an extensive discussion of mathematical foundations of portfolio choice and asset pricing models, and the practice of asset allocation. This guide is conveniently organized into four sections: Mathematical Foundations—normed vector spaces, optimization in discrete and continuous time, utility theory, and uncertainty Portfolio Models—single-period and continuous-time portfolio choice, analogies, asset allocation for a sovereign as an example, and liability-driven allocation Asset Pricing—capital asset pricing models, factor models, option pricing, and expected returns Robust Asset Allocation—estimation of optimization inputs, such as the Black-Litterman Model, shrinkage, and robust optimizers From a top-notch team with impeccable credentials, Portfolio Selection and Asset Pricing provides everything you need to generate long-term profits for your clients while reducing risk.