Download or read book Does Risk Seeking Drive Asset Prices A Stochastic Dominance Analysis of Aggregate Investor Preferences written by Thierry Post and published by . This book was released on 2012 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate whether risk seeking or non-concave utility functions can help to explain the cross-sectional pattern of stock returns. For this purpose, we analyze the stochastic dominance efficiency classification of the value-weighted market portfolio relative to benchmark portfolios based on market capitalization, book-to-market equity ratio and momentum. We use various existing and novel stochastic dominance criteria that account for the possibility that investors exhibit local risk seeking behavior. Our results suggest that Markowitz type utility functions, with risk aversion for losses and risk seeking for gains, can capture the cross-sectional pattern of stock returns. The low average yield on big caps, growth stocks and past losers may reflect investors' twin desire for downside protection in bear markets and upside potential in bull markets.

Download or read book Does Risk Seeking Drive Asset Prices written by Gerrit Tjeerd Post and published by . This book was released on 2002 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Does Risk Seeking Drive Stock Prices A Stochastic Dominance Analysis of Aggregate Investor Preferences and Beliefs written by Thierry Post and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We use various stochastic dominance criteria that account for (local) risk seeking to analyze market portfolio efficiency relative to benchmark portfolios formed on market capitalization, book-to-market equity ratio and price momentum. Our results suggest that reverse S-shaped utility functions with risk aversion for losses and risk seeking for gains can explain stock returns. The results are also consistent with a reverse S-shaped pattern of subjective probability transformation. The low average yield on big caps, growth stocks, and past losers may reflect investors` twin desire for downside protection in bear markets and upside potential in bull markets.

Download or read book Stochastic dominance in portfolio analysis and asset pricing written by Andrey M. Lizyayev and published by Rozenberg Publishers. This book was released on 2010 with total page 136 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Higher Order Stochastic Dominance and Aggregate Investor Preferences written by Yi Fang and published by . This book was released on 2016 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper finds necessary and sufficient conditions of Nth-order stochastic dominance (SD) for risk aversion and develops linear tests for Nth-order SD. We introduce a linear FDSD (fourth-order SD and decreasing absolute risk aversion SD) test for standard risk aversion. A positive research shows that higher order risk attitude cannot explain pricing errors of the small size and high value benchmark portfolios. The empirical results also suggests that any Nth-order SD criterion might not be superior to MV rule when the MV kernel does not violate non-satiation. FDSD has the best discriminate power and substantially improves the pricing kernel.

Download or read book Advances in the use of stochastic dominance in asset pricing written by Philippe Johannes Petrus Marie Versijp and published by Rozenberg Publishers. This book was released on 2007 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Stochastic Dominance written by Haim Levy and published by Springer. This book was released on 2015-10-31 with total page 517 pages. Available in PDF, EPUB and Kindle. Book excerpt: This fully updated third edition is devoted to the analysis of various Stochastic Dominance (SD) decision rules. It discusses the pros and cons of each of the alternate SD rules, the application of these rules to various research areas like statistics, agriculture, medicine, measuring income inequality and the poverty level in various countries, and of course, to investment decision-making under uncertainty. The book features changes and additions to the various chapters, and also includes two completely new chapters. One deals with asymptotic SD and the relation between FSD and the maximum geometric mean (MGM) rule (or the maximum growth portfolio). The other new chapter discusses bivariate SD rules where the individual’s utility is determined not only by his own wealth, but also by his standing relative to his peer group. Stochastic Dominance: Investment Decision Making under Uncertainty, 3rd Ed. covers the following basic issues: the SD approach, asymptotic SD rules, the mean-variance (MV) approach, as well as the non-expected utility approach. The non-expected utility approach focuses on Regret Theory (RT) and mainly on prospect theory (PT) and its modified version, cumulative prospect theory (CPT) which assumes S-shape preferences. In addition to these issues the book suggests a new stochastic dominance rule called the Markowitz stochastic dominance (MSD) rule corresponding to all reverse-S-shape preferences. It also discusses the concept of the multivariate expected utility and analyzed in more detail the bivariate expected utility case. From the reviews of the second edition: "This book is an economics book about stochastic dominance. ... is certainly a valuable reference for graduate students interested in decision making under uncertainty. It investigates and compares different approaches and presents many examples. Moreover, empirical studies and experimental results play an important role in this book, which makes it interesting to read." (Nicole Bäuerle, Mathematical Reviews, Issue 2007 d)

Download or read book Stochastic Dominance Option Pricing written by Stylianos Perrakis and published by Springer. This book was released on 2019-05-03 with total page 277 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book illustrates the application of the economic concept of stochastic dominance to option markets and presents an alternative option pricing paradigm to the prevailing no arbitrage simultaneous equilibrium in the frictionless underlying and option markets. This new methodology was developed primarily by the author, working independently or jointly with other co-authors, over the course of more than thirty years. Among others, it yields the fundamental Black-Scholes-Merton option value when markets are complete, presents a new approach to the pricing of rare event risk, and uncovers option mispricing that leads to tradeable strategies in the presence of transaction costs. In the latter case it shows how a utility-maximizing investor trading in the market and a riskless bond, subject to proportional transaction costs, can increase his/her expected utility by overlaying a zero-net-cost portfolio of options bought at their ask price and written at their bid price, irrespective of the specific form of the utility function. The book contains a unified presentation of these methods and results, making it a highly readable supplement for educators and sophisticated professionals working in the popular field of option pricing. It also features a foreword by George Constantinides, the Leo Melamed Professor of Finance at the Booth School of Business, University of Chicago, USA, who was a co-author in several parts of the book.

Download or read book A Behavioral Approach to Asset Pricing written by Hersh Shefrin and published by Elsevier. This book was released on 2008-05-19 with total page 636 pages. Available in PDF, EPUB and Kindle. Book excerpt: Behavioral finance is the study of how psychology affects financial decision making and financial markets. It is increasingly becoming the common way of understanding investor behavior and stock market activity. Incorporating the latest research and theory, Shefrin offers both a strong theory and efficient empirical tools that address derivatives, fixed income securities, mean-variance efficient portfolios, and the market portfolio. The book provides a series of examples to illustrate the theory. The second edition continues the tradition of the first edition by being the one and only book to focus completely on how behavioral finance principles affect asset pricing, now with its theory deepened and enriched by a plethora of research since the first edition

Download or read book Stochastic Dominance written by Haim Levy and published by Springer Science & Business Media. This book was released on 2006-08-25 with total page 439 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is devoted to investment decision-making under uncertainty. The book covers three basic approaches to this process: the stochastic dominance approach; the mean-variance approach; and the non-expected utility approach, focusing on prospect theory and its modified version, cumulative prospect theory. Each approach is discussed and compared. In addition, this volume examines cases in which stochastic dominance rules coincide with the mean-variance rule and considers how contradictions between these two approaches may occur.

Download or read book Developments in Mean Variance Efficient Portfolio Selection written by M. Agarwal and published by Springer. This book was released on 2015-12-11 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book discusses new determinants for optimal portfolio selection. It reviews the existing modelling framework and creates mean-variance efficient portfolios from the securities companies on the National Stock Exchange. Comparisons enable researchers to rank them in terms of their effectiveness in the present day Indian securities market.

Download or read book Finance and the Behavioral Prospect written by James Ming Chen and published by Springer. This book was released on 2016-10-01 with total page 350 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book explains how investor behavior, from mental accounting to the combustible interplay of hope and fear, affects financial economics. The transformation of portfolio theory begins with the identification of anomalies. Gaps in perception and behavioral departures from rationality spur momentum, irrational exuberance, and speculative bubbles. Behavioral accounting undermines the rational premises of mathematical finance. Assets and portfolios are imbued with “affect.” Positive and negative emotions warp investment decisions. Whether hedging against intertemporal changes in their ability to bear risk or climbing a psychological hierarchy of needs, investors arrange their portfolios and financial affairs according to emotions and perceptions. Risk aversion and life-cycle theories of consumption provide possible solutions to the equity premium puzzle, an iconic financial mystery. Prospect theory has questioned the cogency of the efficient capital markets hypothesis. Behavioral portfolio theory arises from a psychological account of security, potential, and aspiration.

Download or read book Perspectives in Finance and Digital Transformations in Business written by Satyajit Chakrabarti and published by Taylor & Francis. This book was released on 2024-09-18 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents different perspectives in finance and the adoption of digital tools in business in India. It discusses key issues in strategy, organisation, and management for businesses focussing on practical and actionable guidance and innovative tools which offer insights into the formulation and implementation of effective strategies and solutions. The book also looks at the adoption of new digital tools and strategies in different areas of business and management and ways in which these tools can be employed in business analysis, strategy, risk assessment, and management. It presents an overview of the application of new technologies in the industrial, banking, corporate, and agriculture sectors, among others, all aimed at increasing performance and profitability, assessing financial risk and volatility, and improving customer and employee experience. Part of the Contemporary Management Practices series, this book will be useful to practicing managers, researchers, and students who are interested in business and financial strategy, social inclusion, e-business, social entrepreneurship, information management, finance, and banking.

Download or read book New insights into behavioral finance written by Guido Baltussen and published by Rozenberg Publishers. This book was released on 2008 with total page 253 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Efficiency and Anomalies in Stock Markets written by Wing-Keung Wong and published by Mdpi AG. This book was released on 2022-02-17 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Efficient Market Hypothesis believes that it is impossible for an investor to outperform the market because all available information is already built into stock prices. However, some anomalies could persist in stock markets while some other anomalies could appear, disappear and re-appear again without any warning. A Special Issue on "Efficiency and Anomalies in Stock Markets" will be devoted to advancements in the theoretical development of market efficiency and anomaly in the Stock Market, as well as applications in Stock Market efficiency and anomalies.

Download or read book Option Implied Risk Neutral Distributions and Risk Aversion written by Jens Carsten Jackwerth and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Factor Investing and Asset Allocation A Business Cycle Perspective written by Vasant Naik and published by CFA Institute Research Foundation. This book was released on 2016-12-30 with total page 192 pages. Available in PDF, EPUB and Kindle. Book excerpt: