Download or read book Bubbles and Multiple Factor Asset Pricing Models written by Robert A. Jarrow and published by . This book was released on 2015 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper derives a multiple-factor asset pricing model with asset price bubbles in an arbitrage-free, competitive, and frictionless market. As such it generalizes existing asset pricing models, all of which implicitly assume asset price bubbles do not exist. This generalization leads to two new empirical implications. The first is that positive alphas can exist in an arbitrage-free market due to the existence of asset price bubbles. These positive alphas do not represent abnormal profit opportunities. The second is that bubble risk factors can exist with positive risk premiums. The testing of these new empirical implications awaits subsequent research.

Download or read book Continuous Time Asset Pricing Theory written by Robert A. Jarrow and published by Springer Nature. This book was released on 2021-07-30 with total page 470 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asset pricing theory yields deep insights into crucial market phenomena such as stock market bubbles. Now in a newly revised and updated edition, this textbook guides the reader through this theory and its applications to markets. The new edition features ​new results on state dependent preferences, a characterization of market efficiency and a more general presentation of multiple-factor models using only the assumptions of no arbitrage and no dominance. Taking an innovative approach based on martingales, the book presents advanced techniques of mathematical finance in a business and economics context, covering a range of relevant topics such as derivatives pricing and hedging, systematic risk, portfolio optimization, market efficiency, and equilibrium pricing models. For applications to high dimensional statistics and machine learning, new multi-factor models are given. This new edition integrates suicide trading strategies into the understanding of asset price bubbles, greatly enriching the overall presentation and further strengthening the book’s underlying theme of economic bubbles. Written by a leading expert in risk management, Continuous-Time Asset Pricing Theory is the first textbook on asset pricing theory with a martingale approach. Based on the author’s extensive teaching and research experience on the topic, it is particularly well suited for graduate students in business and economics with a strong mathematical background.

Download or read book A Generalized Multiple Factor Asset Pricing Model written by Robert A. Jarrow and published by . This book was released on 2013 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper derives a generalized multiple-factor asset pricing model using only the assumption of no arbitrage. This generalization differs from the standard multiple-factor pricing models in two ways. First, similar to standard models, a traded asset's expected return is linear in a finite number of traded risk-factor returns. Different from standard models, however, this model allows an infinite number of distinct risk-factors in the economy, where any asset's return depends on only a finite number of these. Different assets will, in general, depend on a different finite set of risk-factors. Second, positive alphas imply arbitrage opportunities and not just abnormal expected returns. This model can potentially explain many of the observed differences between existing multiple-factor asset pricing model implications and the empirical evidence.

Download or read book Multifactor Assets Pricing Model written by Khushboo Sagar and published by . This book was released on 2020 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Generous consideration has been pursued to the empirical testing of multi factor assets pricing models. However, literature provides mixed kind of evidences in the support of multi factor assets pricing model. This study reviews 20 research articles based on multi factor assets pricing model and examines 25 research papers based on the empirically testing of multi factor assets pricing model published during 2001 and 2018 to study the multi factor assets pricing model in the Indian context as well as foreign context. CAPM is a popular normative model used by researchers to explain the relationship between risk and expected return of a risky asset which was developed by Sharpe (1964) and Lintner (1965). This model takes only one risk factor which is the excess market portfolio return (Market premium). Because of poor performance of CAPM in explaining realized returns, the Fama and French three factor asset pricing model (1993) was developed. Fama and French (1993) documented the size effect and the value effect that were not included in the CAPM, generally known as CAPM anomalies. Mark M. Carhart (1997) developed the Carhart four factor model. It is an extension of the FF three factor model with one another factor i.e. momentum factor effect for asset pricing of stocks. In view of the limitations of the earlier three-factor model, Fama and French five-factor asset pricing model (2014) was developed. Fama and French (2014) came with profitability pattern and investment pattern in average stock return along with the market premium, size premium and value premium. This paper may be an expedient source of information to the academics, financial analyst and researchers to understand the asset pricing model.

Download or read book Continuous Time Asset Pricing Theory written by Robert A. Jarrow and published by Springer. This book was released on 2018-06-04 with total page 457 pages. Available in PDF, EPUB and Kindle. Book excerpt: Yielding new insights into important market phenomena like asset price bubbles and trading constraints, this is the first textbook to present asset pricing theory using the martingale approach (and all of its extensions). Since the 1970s asset pricing theory has been studied, refined, and extended, and many different approaches can be used to present this material. Existing PhD–level books on this topic are aimed at either economics and business school students or mathematics students. While the first mostly ignore much of the research done in mathematical finance, the second emphasizes mathematical finance but does not focus on the topics of most relevance to economics and business school students. These topics are derivatives pricing and hedging (the Black–Scholes–Merton, the Heath–Jarrow–Morton, and the reduced-form credit risk models), multiple-factor models, characterizing systematic risk, portfolio optimization, market efficiency, and equilibrium (capital asset and consumption) pricing models. This book fills this gap, presenting the relevant topics from mathematical finance, but aimed at Economics and Business School students with strong mathematical backgrounds.

Download or read book A Comparison of Multi factor Asset Pricing Models Using US Stock Market Data written by Pia Grammig and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A New Model of Capital Asset Prices written by James W. Kolari and published by Springer Nature. This book was released on 2021-03-01 with total page 326 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book proposes a new capital asset pricing model dubbed the ZCAPM that outperforms other popular models in empirical tests using US stock returns. The ZCAPM is derived from Fischer Black’s well-known zero-beta CAPM, itself a more general form of the famous capital asset pricing model (CAPM) by 1990 Nobel Laureate William Sharpe and others. It is widely accepted that the CAPM has failed in its theoretical relation between market beta risk and average stock returns, as numerous studies have shown that it does not work in the real world with empirical stock return data. The upshot of the CAPM’s failure is that many new factors have been proposed by researchers. However, the number of factors proposed by authors has steadily increased into the hundreds over the past three decades. This new ZCAPM is a path-breaking asset pricing model that is shown to outperform popular models currently in practice in finance across different test assets and time periods. Since asset pricing is central to the field of finance, it can be broadly employed across many areas, including investment analysis, cost of equity analyses, valuation, corporate decision making, pension portfolio management, etc. The ZCAPM represents a revolution in finance that proves the CAPM as conceived by Sharpe and others is alive and well in a new form, and will certainly be of interest to academics, researchers, students, and professionals of finance, investing, and economics.

Download or read book Positive Alphas and a Generalized Multiple Factor Asset Pricing Model written by Robert A. Jarrow and published by . This book was released on 2015 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper derives a generalized multiple-factor asset pricing model using only the assumptions of the existence of an equivalent martingale measure, frictionless, and competitive markets. As such, all existing multiple-factor asset pricing models, including the intertermporal CAPM and Ross' APT, are special cases of this formulation. First, similar to the standard models, a traded asset's expected return is linear in a finite number of traded risk-factor returns. Different from standard models, however, this model allows potentially an infinite number of distinct risk-factors in the economy. Different assets will, in general, depend on a different finite set of risk-factors. Second, positive alphas imply arbitrage opportunities or the existence of dominated securities, and not just abnormal expected returns. This generalization is consistent with many of the observed discrepancies between existing multiple-factor asset pricing models and the empirical evidence.

Download or read book Multi moment Asset Allocation and Pricing Models written by Emmanuel Jurczenko and published by John Wiley & Sons. This book was released on 2006-10-02 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book A Test of the Multi factor Asset Pricing Model with the ASA NBER Macroeconomic Forecasts written by Kiwoong Cheong and published by . This book was released on 1988 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book An Equilibrium Capital Asset Pricing Model in Markets with Price Jumps and Price Bubbles written by Robert A. Jarrow and published by . This book was released on 2017 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper derives an equilibrium capital asset pricing model (CAPM) in a market where asset prices can exhibit price jumps and price bubbles. We derive a generalized intertertemporal CAPM and consumption CAPM for these markets. The derived risk return relation differs from the classical results only in the characterization of the state price density, which depends on the existence of price bubbles, and in the number and quantity of systematic risk factors.

Download or read book Testing Multi factor Asset Pricing Models in the Visegrad Countries written by Magdalena Morgese Borys and published by . This book was released on 2007 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A Review of Capital Asset Pricing Models written by Don U. A. Galagedera and published by . This book was released on 2006 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a review of the main features of asset pricing models. The review includes single-factor and multi-factor models, extended forms of the Capital Asset Pricing Model (CAPM) with higher-order co-moments and asset pricing models conditional on time varying volatility models.

Download or read book Digital Economy Complexity and Variety vs Rationality written by Elena G. Popkova and published by Springer Nature. This book was released on 2019-09-14 with total page 1055 pages. Available in PDF, EPUB and Kindle. Book excerpt: This proceedings book features selected papers from the 9th National Scientific and Practical Conference “Digital Economy: Complexity and Variety Vs. Rationality,” which took place on April 17–18, 2019, in Vladimir (Russian Federation). It presents the latest research in the field of the digital economy, discussing its role in the creation of advantages for the state, entrepreneurship, and society, as well as the emergence of new economic risks. The chapters address the following topics: the importance of economy’s digital modernization, tools for the formation of the digital economy in Russia, specific features and perspectives of digital modernization of the regional economy, an overview of the social consequences of transition to the digital economy, financial components of the digital economy, legal challenges regarding the digital reality for society and state, and the main challenges and threats to the profession of jurisprudence in the context of the digitization of the economy. Intended for representatives of the academic community and researchers interested in the formation of the digital economy and digital society as well as undergraduates, postgraduates, and masters of economic specialties, the book is also a valuable resource for companies that use or wishing to implement digital technologies into their economic practices; and public and government employees involved with monitoring, control, and regulation of the digital economy.

Download or read book On Fragility of Bubbles in Equilibrium Asset Pricing Models of Lucas type written by Luigi Montrucchio and published by . This book was released on 1999 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Pricing Factor Models in the German Stock Market written by Julian Fischer and published by GRIN Verlag. This book was released on 2021-06-14 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2021 in the subject Business economics - Investment and Finance, grade: 1,7, University of Hannover (Institut für Finanzwirtschaft und Rohstoffmärkte), language: English, abstract: In this paper, we examine how various modern multifactor models, such as the Carhart factor model, five-factor model and its complement six-factor model by Fama and French, the q-factor model by Hou, Wue and Zhang, and the mispricing factor model by Stambaugh and Yuan perform in the German stock market. It is discernible that, depending on the application model, like factor spanning tests, different sortings, return anomalies, sector- and equity fund investigation, they often provide quite similar explanatory power, while in individual cases sometimes one and sometimes the other model performs better. The underlying factors contribute differently to the explanatory power depending on the time period. Thus, in case of doubt, the six-factor model is preferable, as it is the most versatile model. Since the establishment of the capital asset pricing model as a cornerstone of modern capital market theory in the 1960s, new investigations and studies have been built on this model on an ongoing basis. This continuously leads to extensions and modifications of the asset pricing models since then. These models can be used in various ways, for example to explain the pricing of risky financial assets under restrictive assumptions or to gain important insights into the relationship between expected return and risk of securities. These can be used in various ways, for example to explain the pricing of risky financial assets under restrictive assumptions or to gain important insights into the relationship between expected return and risk of securities. In this paper, we aim to answer the overarching research question of how modern asset pricing models perform for the German stock market. For this purpose, we first discuss the characteristics of the German stock market, followed by the milestones of the development of factor models, their empirical evidence and their factors, as well as internationally known return anomalies. In the subsequent part, five modern asset pricing models are tested in different scenarios of the German stock market, including factor spanning tests, different sortings, anomalies, sectors and in equity funds. For this purpose, various analytical methods are used and performed with the software “Stata”. Finally, the comprehensive results are summarized and concluded.

Download or read book Bursting the Bubble Rationality in a Seemingly Irrational Market written by David F. DeRosa and published by CFA Institute Research Foundation. This book was released on 2021-04-02 with total page 206 pages. Available in PDF, EPUB and Kindle. Book excerpt: The presence of speculative bubbles in capital markets (an important area of interest in financial history) is widely accepted across many circles. Talk of them is pervasive in the media and especially in the popular financial press. Bubbles are thought to be found primarily in the stock market, which is our main interest, although bubbles are said to occur in other markets. Bubbles go hand in hand with the notion that markets can be irrational. The academic community has a great interest in bubbles, and it has produced scholarly literature that is voluminous. For some economists, doing bubble research is like joining the vanguard of a Kuhnian paradigm shift in economic thinking. Not so fast. If bubbles did exist, they would pose a serious challenge to neoclassical finance. Bubbles would contradict the ideas that markets are rational or work in an informationally efficient manner. That’s what makes the topic of bubbles interesting. This book reviews and evaluates the academic literature as well as some popular investment books on the possible existence of speculative bubbles in the stock market. The main question is whether there is convincing empirical evidence that bubbles exist. A second question is whether the theoretical concepts that have been advanced for bubbles make them plausible. The reader will discover that I am skeptical that bubbles actually exist. But I do not think I or anyone else will ever be able to conclusively prove that there has never been a bubble. From studying the literature and from reading history, I find that many famous purported bubbles reflect inaccurate history or mistakes in analysis or simply cannot be shown to have existed. In other instances, bubbles might have existed. But in each of those cases, there are credible rational explanations. And good evidence exists for the idea that even if bubbles do exist, they are not of great importance to understanding the stock market.