Portfolio Choice and Asset Pricing with Endogenous Beliefs and Skewness Preference
Author | : Center for Economic Research (Tilburg) |
Publisher | : |
Total Pages | : |
Release | : 2014 |
Genre | : |
ISBN | : 9789056684129 |
Download Portfolio Choice And Asset Pricing With Endogenous Beliefs And Skewness Preference full books in PDF, epub, and Kindle. Read online free Portfolio Choice And Asset Pricing With Endogenous Beliefs And Skewness Preference ebook anywhere anytime directly on your device. Fast Download speed and no annoying ads. We cannot guarantee that every ebooks is available!
Author | : Center for Economic Research (Tilburg) |
Publisher | : |
Total Pages | : |
Release | : 2014 |
Genre | : |
ISBN | : 9789056684129 |
Author | : Kerry Back |
Publisher | : Oxford University Press |
Total Pages | : 504 |
Release | : 2010-09-10 |
Genre | : Business & Economics |
ISBN | : 0199939071 |
In Asset Pricing and Portfolio Choice Theory, Kerry E. Back at last offers what is at once a welcoming introduction to and a comprehensive overview of asset pricing. Useful as a textbook for graduate students in finance, with extensive exercises and a solutions manual available for professors, the book will also serve as an essential reference for scholars and professionals, as it includes detailed proofs and calculations as section appendices. Topics covered include the classical results on single-period, discrete-time, and continuous-time models, as well as various proposed explanations for the equity premium and risk-free rate puzzles and chapters on heterogeneous beliefs, asymmetric information, non-expected utility preferences, and production models. The book includes numerous exercises designed to provide practice with the concepts and to introduce additional results. Each chapter concludes with a notes and references section that supplies pathways to additional developments in the field.
Author | : Markus Konrad Brunnermeier |
Publisher | : |
Total Pages | : 48 |
Release | : 2007 |
Genre | : Assets (Accounting) |
ISBN | : |
Human beings want to believe that good outcomes in the future are more likely, but also want to make good decisions that increase average outcomes in the future. We consider a general equilibrium model with complete markets and show that when investors hold beliefs that optimally balance these two incentives, portfolio holdings and asset prices match six observed patterns: (i) because the cost of biased beliefs are typically second-order, investors typically hold biased assessments of probabilities and so are not perfectly diversified according to objective metrics; (ii) because the costs of biased beliefs temper these biases, the utility costs of the lack of diversification are limited; (iii) because there is a complementarity between believing a state more likely and purchasing more of the asset that pays off in that state, investors over-invest in only one Arrow-Debreu security and smooth their consumption well across the remaining states; (iv) because different households can settle on different states to be optimistic about, optimal portfolios of ex ante identical investors can be heterogeneous; (v) because low-price and low-probability states are the cheapest states to buy consumption in, overoptimism about these states distorts consumption the least in the rest of the states, so that investors tend to overinvest in the most skewed securities; (vi) finally, because investors with optimal expectations have higher demand for more skewed assets, ceteris paribus, more skewed asset can have lower average returns.
Author | : Kerry Back |
Publisher | : |
Total Pages | : |
Release | : 2016-08-01 |
Genre | : Capital assets pricing model |
ISBN | : 9780190241162 |
In Asset Pricing and Portfolio Choice Theory, Kerry E. Back at last offers what is at once a welcoming introduction to and a comprehensive overview of asset pricing. Useful as a textbook for graduate students in finance, with extensive exercises and a solutions manual available for professors, the book will also serve as an essential reference for scholars and professionals, as it includes detailed proofs and calculations as section appendices. Topics covered include the classical results on single-period, discrete-time, and continuous-time models, as well as various proposed explanations for the equity premium and risk-free rate puzzles and chapters on heterogeneous beliefs, asymmetric information, non-expected utility preferences, and production models. The book includes numerous exercises designed to provide practice with the concepts and to introduce additional results. Each chapter concludes with a notes and references section that supplies pathways to additional developments in the field.
Author | : Markus K. Brunnermeier |
Publisher | : |
Total Pages | : 33 |
Release | : 2010 |
Genre | : |
ISBN | : |
Human beings want to believe that good outcomes in the future are more likely, but also want to make good decisions that increase average outcomes in the future. We consider a general equilibrium model with complete markets and show that when investors hold beliefs that optimally balance these two incentives, portfolio holdings and asset prices match six observed patterns: (i) because the cost of biased beliefs are typically second-order, investors typically hold biased assessments of probabilities and so are not perfectly diversified according to objective metrics; (ii) because the costs of biased beliefs temper these biases, the utility cost of the lack of diversification are limited; (iii) because there is a complementarity between believing a state more likely and purchasing more of the asset that pays off in that state, investors over-invest in only one Arrow-Debreu security and smooth their consumption well across the remaining states; (iv) because different households can settle on different states to be optimistic about, optimal portfolios of ex ante identical investors can be heterogeneous; (v) because low-price and low-probability states are the cheapest states to buy consumption in, overoptimism about these states distorts consumption the least in the rest of the states, so that investors tend to overinvest in the most skewed securities; (vi) finally, because investors with optimal expectations have higher demand for more skewed assets, ceteris paribus, more skewed asset can have lower average returns.
Author | : Jamil Baz |
Publisher | : McGraw Hill Professional |
Total Pages | : 426 |
Release | : 2022-09-06 |
Genre | : Business & Economics |
ISBN | : 126427016X |
This uniquely comprehensive guide provides expert insights into 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 your craft or an academic tome of theories and mathematical formulas. From three top experts, 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 thorough 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―robust estimation of optimization inputs, such as the Black-Litterman Model and shrinkage, and robust optimizers Whether you are a sophisticated investor or advanced graduate student, this high-level title combines rigorous mathematical theory with an emphasis on practical implementation techniques.
Author | : Lubos Pastor |
Publisher | : |
Total Pages | : 49 |
Release | : 2009 |
Genre | : |
ISBN | : |
Finance theory can be used to form informative prior beliefs in financial decision-making. This paper approaches portfolio selection in a Bayesian framework that incorporates a prior degree of belief in an asset pricing model. Sample evidence on home bias and value and size effects is evaluated from an asset-allocation perspective. U.S. investors' belief in the domestic CAPM must be very strong to justify the home bias observed in their equity holdings. The same strong prior belief results in large and stable optimal positions in the Fama-French book-to-market portfolio in combination with the market since the 1940s.
Author | : René M. Stulz |
Publisher | : |
Total Pages | : 56 |
Release | : 1994 |
Genre | : Capital assets pricing model |
ISBN | : |
In general, theories of portfolio choice and asset pricing let investors differ at most with respect to their preferences, their wealth and, possibly, their information sets. If there are multiple countries, however, the investment and consumption opportunity sets of investors depend on their country of residence. International portfolio choice and asset pricing theories attempt to understand how the existence of country-specific investment and consumption opportunity sets affect the portfolios held by investors and the expected returns of assets. In this paper, we review these theories within a common framework, discuss how they fare in empirical tests, and assess their relevance for the field of international finance.
Author | : Lars E. O. Svensson |
Publisher | : |
Total Pages | : 52 |
Release | : 1988 |
Genre | : Investments, Foreign |
ISBN | : |
This paper examines portfolio choice and asset pricing when some assets are nontraded, for instance when a country cannot trade claims to its output on world capital markets, when a government cannot trade claims to future tax revenues, or when an individual cannot trade claims to his future wages. The close relation between portfolio choice with and implicit pricing of nontraded assets is emphasized. A variant of Cox, Ingersoll and Ross's Fundamental Valuation Equation is derived and used to interpret the optimal portfolio. Explicit solutions are presented to the portfolio and pricing problem for some special cases, including when income from the nontraded assets is a diffusion process, not spanned by traded assets, and affected by a state variable.