Dynamic Correlation or Tail Dependence Hedging for Portfolio
... Longin and Solnik (2001) find that international stock markets tend to be more highly correlated during extreme market downturns than during extreme market upturns, establishing a pattern of asymmetric tail dependence that linear measures of dependence cannot describe. Ang and Chen (2002) confirm th ...
... Longin and Solnik (2001) find that international stock markets tend to be more highly correlated during extreme market downturns than during extreme market upturns, establishing a pattern of asymmetric tail dependence that linear measures of dependence cannot describe. Ang and Chen (2002) confirm th ...
Backtesting Value-at-Risk based on Tail Losses Woon K. Wong
... for the market risk at 99% whereas for the credit and operational risks, VaR is calculated at 99.9% level. Moreover, due to diversification, VaR at the level of the whole bank is often found to be adequate for regulatory capital determination. As long as there is no single position that dominates t ...
... for the market risk at 99% whereas for the credit and operational risks, VaR is calculated at 99.9% level. Moreover, due to diversification, VaR at the level of the whole bank is often found to be adequate for regulatory capital determination. As long as there is no single position that dominates t ...
In Short Supply: Short‐Sellers and Stock Returns
... addition, we document an inextricable link between accounting characteristics associated with equity market pricing anomalies, and short‐selling activities. Specifically, we find that these accounting characteristics increase borrowing costs and reduce the supply of available shares for lending, ...
... addition, we document an inextricable link between accounting characteristics associated with equity market pricing anomalies, and short‐selling activities. Specifically, we find that these accounting characteristics increase borrowing costs and reduce the supply of available shares for lending, ...
Speculative Retail Trading and Asset Prices
... This result is robust to variations in portfolio sorting and weighting methods. It is not limited to particular sample periods. It is stronger among small stocks. Our results do not change materially when we follow the Asparouhova, Bessembinder, and Kalcheva (2010) method to account for the impact o ...
... This result is robust to variations in portfolio sorting and weighting methods. It is not limited to particular sample periods. It is stronger among small stocks. Our results do not change materially when we follow the Asparouhova, Bessembinder, and Kalcheva (2010) method to account for the impact o ...
FINANCIAL RISK TOLERANCE: A STATE OR A TRAIT?
... accept it. Financial risk tolerance is a measure of a person’s willingness to accept the risk of an unfavourable result for the chance of achieving a favourable result. Financial risk tolerance has attracted the attention of researchers in various disciplines including behavioural economists (e.g. R ...
... accept it. Financial risk tolerance is a measure of a person’s willingness to accept the risk of an unfavourable result for the chance of achieving a favourable result. Financial risk tolerance has attracted the attention of researchers in various disciplines including behavioural economists (e.g. R ...
Bonds, Stocks, and Sources of Mispricing
... downgrades, which lends support to the notion that, after all, institutions tend to be more sophisticated than retail investors. While SYY show that high sentiment leads to equity overpricing in general, ACJP relate overpricing to financial distress in low-rated firms. Consistent with SYY, we find n ...
... downgrades, which lends support to the notion that, after all, institutions tend to be more sophisticated than retail investors. While SYY show that high sentiment leads to equity overpricing in general, ACJP relate overpricing to financial distress in low-rated firms. Consistent with SYY, we find n ...
Geographic dispersion and stock returns
... implications for unconditional stock returns than the model of Merton (1987). In particular, models that generate excess information acquisition will typically generate more informative prices, which lowers the equilibrium ex ante equity premium. Thus, our main empirical finding supports the mechanis ...
... implications for unconditional stock returns than the model of Merton (1987). In particular, models that generate excess information acquisition will typically generate more informative prices, which lowers the equilibrium ex ante equity premium. Thus, our main empirical finding supports the mechanis ...
Risk management for wealth and asset management
... Reputation is a fragile asset, as much about perception and the perception of behaviors as it is about fact — which means that a reputation can be gained over a considerable period of time, and lost in considerably less time. Reputation is a wider concept than brand alone, impacting ethics, trust, r ...
... Reputation is a fragile asset, as much about perception and the perception of behaviors as it is about fact — which means that a reputation can be gained over a considerable period of time, and lost in considerably less time. Reputation is a wider concept than brand alone, impacting ethics, trust, r ...
Value versus Growth - Krannert School of Management
... is more than 14 standard errors from zero), and is positive for 472 out of 648 months (about 73% of the time). Conditional on being in the high-volatility state, expected one-year ahead returns for the value decile are substantially higher than those for the growth decile: 11.21% versus −1.17% per a ...
... is more than 14 standard errors from zero), and is positive for 472 out of 648 months (about 73% of the time). Conditional on being in the high-volatility state, expected one-year ahead returns for the value decile are substantially higher than those for the growth decile: 11.21% versus −1.17% per a ...
What Risk Premium Is "Normal"? - Wharton Statistics Department
... which stocks appear to have a near-zero (or negative) risk premium relative to government bonds, is abnormal in the extreme. Even if we add 100 bps to the risk premium to allow for the impact of stock buybacks, today's risk premium relative to the more relevant corporate bond alternatives is still n ...
... which stocks appear to have a near-zero (or negative) risk premium relative to government bonds, is abnormal in the extreme. Even if we add 100 bps to the risk premium to allow for the impact of stock buybacks, today's risk premium relative to the more relevant corporate bond alternatives is still n ...
An Empirical Assessment of Models of the Value Premium*
... variables. The way we identify our conditional variables is motivated by the limits-toarbitrage literature, which has shown that the value premium is much more pronounced among firms with high limits to arbitrage. We therefore choose six commonly used proxies for limits to arbitrage as our moderator ...
... variables. The way we identify our conditional variables is motivated by the limits-toarbitrage literature, which has shown that the value premium is much more pronounced among firms with high limits to arbitrage. We therefore choose six commonly used proxies for limits to arbitrage as our moderator ...
Playing the Field: Geomagnetic Storms and the Stock
... effect in stock returns is related to stock size, small capitalization stocks being affected by GMS more than large capitalization stocks. This latter result is consistent with the empirical finding that institutional ownership is positively correlated with stock capitalization, small cap stocks bei ...
... effect in stock returns is related to stock size, small capitalization stocks being affected by GMS more than large capitalization stocks. This latter result is consistent with the empirical finding that institutional ownership is positively correlated with stock capitalization, small cap stocks bei ...
Definition of Risk Risk can be defined as “uncertainty about financial
... The term risk management relating to business risks first appeared in the 1950s; not until 1970 did non-financial businesses begin to practice risk management in a meaningful way; Risk managers were overwhelmingly concerned with hazard risks and the purchase of insurance; risk associated with the fi ...
... The term risk management relating to business risks first appeared in the 1950s; not until 1970 did non-financial businesses begin to practice risk management in a meaningful way; Risk managers were overwhelmingly concerned with hazard risks and the purchase of insurance; risk associated with the fi ...
Misvaluation and Return Anomalies in Distressed Stocks
... shut down the firm. For stocks far from the default boundary (stocks with positive cash flows, low volatility, and low leverage ratios), normal valuation techniques are still adequate and not much may be gained by using our model for such stocks. This is confirmed by our empirical results. The perfo ...
... shut down the firm. For stocks far from the default boundary (stocks with positive cash flows, low volatility, and low leverage ratios), normal valuation techniques are still adequate and not much may be gained by using our model for such stocks. This is confirmed by our empirical results. The perfo ...
Asset Pricing When Traders Sell Extreme Winners and Losers
... schedule (selling – buying), which corresponds to investors’ demand. Second, I estimate the relative magnitude of demand perturbation on the gain side versus that on the loss side, so that later we can see if the price effects from the two sides are consistent with this relation. I conduct analysis ...
... schedule (selling – buying), which corresponds to investors’ demand. Second, I estimate the relative magnitude of demand perturbation on the gain side versus that on the loss side, so that later we can see if the price effects from the two sides are consistent with this relation. I conduct analysis ...
Risk Aversion, Entrepreneurial Risk, and Portfolio Selection
... when private business equity is excluded from their entire portfolio, entrepreneurs are either more risk averse or exhibit no significant difference in their risk preference relative to other similar wealthy households. Their investment in other risky assets is either lower or similar to that of gen ...
... when private business equity is excluded from their entire portfolio, entrepreneurs are either more risk averse or exhibit no significant difference in their risk preference relative to other similar wealthy households. Their investment in other risky assets is either lower or similar to that of gen ...
Transferring Portfolio Selection Theory to Customer Portfolio
... question as to whether the estimated values for financial assets are far more accurate compared to the estimations that have to be made for customers. Equally, the assumption about stationary values is a limitation that hits the applicability of the model in both cases. A company unexpectedly selli ...
... question as to whether the estimated values for financial assets are far more accurate compared to the estimations that have to be made for customers. Equally, the assumption about stationary values is a limitation that hits the applicability of the model in both cases. A company unexpectedly selli ...
Accruals, Net Stock Issues and Value-Glamour Anomalies
... opportunity by issuing (repurchasing) securities when they are overvalued (undervalued) to interpret the negative relation of corporate financing activities and stock returns. External financing decisions may thus reveal managers’ private information about mispricing. Consistent with the misvaluatio ...
... opportunity by issuing (repurchasing) securities when they are overvalued (undervalued) to interpret the negative relation of corporate financing activities and stock returns. External financing decisions may thus reveal managers’ private information about mispricing. Consistent with the misvaluatio ...
GCD Discount Rate - Global Credit Data
... Market return of marketable credit instrument ........................................................... 14 ...
... Market return of marketable credit instrument ........................................................... 14 ...
An Expanded Study on the Stock Market Temperature
... temperatures cause aggression and very high temperature can also induce hysteria and apathy.2 Given this psychological finding, we hypothesize that lower temperature is associated with higher stock return due to aggressive risk taking while high temperature can lead to either higher or lower stock ...
... temperatures cause aggression and very high temperature can also induce hysteria and apathy.2 Given this psychological finding, we hypothesize that lower temperature is associated with higher stock return due to aggressive risk taking while high temperature can lead to either higher or lower stock ...
Inequality, stock market participation, and the equity premium
... (1996) showed that any aggregate consumption stream can coexist with any price process if the idiosyncratic shocks are chosen in just the right way. This is because only individual consumption streams need to be consistent with prices, not necessarily the aggregate; individual streams can be made hi ...
... (1996) showed that any aggregate consumption stream can coexist with any price process if the idiosyncratic shocks are chosen in just the right way. This is because only individual consumption streams need to be consistent with prices, not necessarily the aggregate; individual streams can be made hi ...
Concentration risk in credit portfolios - June 2006
... measuring and managing single-name concentration. By contrast, no generally accepted standardised methods for risk-sensitive treatment of sectoral concentration and the performance of suitable stress tests have yet emerged. Concentration risk and the internal methods used to manage it will, amongst ...
... measuring and managing single-name concentration. By contrast, no generally accepted standardised methods for risk-sensitive treatment of sectoral concentration and the performance of suitable stress tests have yet emerged. Concentration risk and the internal methods used to manage it will, amongst ...
S2AV: A valuation methodology for insurance companies
... constraints on distribution of surplus, which are discussed later. Our basic goal has been to develop a methodology which measures value as the net present value of future expected distributable profits at the investor’s required rate of return. We are not saying that every investor will or should w ...
... constraints on distribution of surplus, which are discussed later. Our basic goal has been to develop a methodology which measures value as the net present value of future expected distributable profits at the investor’s required rate of return. We are not saying that every investor will or should w ...
Bank CEO Incentives and the Credit Crisis
... shareholders would have benefitted in the long run. The above conclusion would not hold either if executives paid more attention to incentives promising immediate cash payouts than to incentives paid in paper gains not realizable until long in the future. Much attention has been paid to the role of ...
... shareholders would have benefitted in the long run. The above conclusion would not hold either if executives paid more attention to incentives promising immediate cash payouts than to incentives paid in paper gains not realizable until long in the future. Much attention has been paid to the role of ...
Beta (finance)
In finance, the beta (β) of an investment is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors. The market portfolio of all investable assets has a beta of exactly 1. A beta below 1 can indicate either an investment with lower volatility than the market, or a volatile investment whose price movements are not highly correlated with the market. An example of the first is a treasury bill: the price does not go up or down a lot, so it has a low beta. An example of the second is gold. The price of gold does go up and down a lot, but not in the same direction or at the same time as the market.A beta greater than one generally means that the asset both is volatile and tends to move up and down with the market. An example is a stock in a big technology company. Negative betas are possible for investments that tend to go down when the market goes up, and vice versa. There are few fundamental investments with consistent and significant negative betas, but some derivatives like equity put options can have large negative betas.Beta is important because it measures the risk of an investment that cannot be reduced by diversification. It does not measure the risk of an investment held on a stand-alone basis, but the amount of risk the investment adds to an already-diversified portfolio. In the capital asset pricing model, beta risk is the only kind of risk for which investors should receive an expected return higher than the risk-free rate of interest.The definition above covers only theoretical beta. The term is used in many related ways in finance. For example, the betas commonly quoted in mutual fund analyses generally measure the risk of the fund arising from exposure to a benchmark for the fund, rather than from exposure to the entire market portfolio. Thus they measure the amount of risk the fund adds to a diversified portfolio of funds of the same type, rather than to a portfolio diversified among all fund types.Beta decay refers to the tendency for a company with a high beta coefficient (β > 1) to have its beta coefficient decline to the market beta. It is an example of regression toward the mean.