Certainty Equivalents and Risk-Adjusted Discount Rates
... the coal plant. Alternatively, we could have discounted the risky ⫺$2 billion shutdown cost at a lower discount rate of 5.38%. Panel B of Table 13B-2 shows that this produces a PV of ⫺$394 million, the same as the certainty equivalent method. Not only is the appropriate RADR for this cash outflow le ...
... the coal plant. Alternatively, we could have discounted the risky ⫺$2 billion shutdown cost at a lower discount rate of 5.38%. Panel B of Table 13B-2 shows that this produces a PV of ⫺$394 million, the same as the certainty equivalent method. Not only is the appropriate RADR for this cash outflow le ...
The Equity Premium: Why Is It a Puzzle? Rajnish Mehra
... the standard deviation of the returns to stocks (about 20 percent a year historically) is larger than that of the returns to T-bills (about 4 percent a year), ©2003, AIMR® ...
... the standard deviation of the returns to stocks (about 20 percent a year historically) is larger than that of the returns to T-bills (about 4 percent a year), ©2003, AIMR® ...
Multi-Period Trading via Convex Optimization
... very small in practical problems, for several reasons. In [10], the authors developed a numerical bounding method that quantifies the loss of optimality when using a simplified approach, and found it to be very small in numerical examples. But in fact, the dynamic programming formulation is itself a ...
... very small in practical problems, for several reasons. In [10], the authors developed a numerical bounding method that quantifies the loss of optimality when using a simplified approach, and found it to be very small in numerical examples. But in fact, the dynamic programming formulation is itself a ...
A Transaction Data Study of the Forward Bias Puzzle
... levels relative to low interest rate ones; and (iii) also realize that there is significant risk of a dramatic reversal connected to carry trading. In this paper we explore all three of these themes in a framework that allows for order flow 3 related risk premia and expectational errors as well as ...
... levels relative to low interest rate ones; and (iii) also realize that there is significant risk of a dramatic reversal connected to carry trading. In this paper we explore all three of these themes in a framework that allows for order flow 3 related risk premia and expectational errors as well as ...
- CAIA Association
... excess return during that time period. A 2014 paper from Fidelity similarly concludes that higher Active Share leads to higher dispersion and downside risk, attributing most of the positive relationship between Active Share and excess return to small-cap size exposure for managers.⁵ In this view, Ac ...
... excess return during that time period. A 2014 paper from Fidelity similarly concludes that higher Active Share leads to higher dispersion and downside risk, attributing most of the positive relationship between Active Share and excess return to small-cap size exposure for managers.⁵ In this view, Ac ...
NBER WORKING PAPER SERIES JUNIOR IS RICH: BEQUESTS AS CONSUMPTION George Constantinides
... off. In effect, the consumption cost to an investor of acquiring one more unit of an asset is significantly reduced by the amount of the bequest he can rationally expect to receive. In a stationary equilibrium, the more investors wish to bequeath, the more wealth they receive – in the form of beque ...
... off. In effect, the consumption cost to an investor of acquiring one more unit of an asset is significantly reduced by the amount of the bequest he can rationally expect to receive. In a stationary equilibrium, the more investors wish to bequeath, the more wealth they receive – in the form of beque ...
Chapter 6 Common Stocks
... • Stock Returns: take into account both price changes and dividend income – Returns from capital gains range from an average of 15.3% during the 1990s to -5.3% from 2000–2008 – Returns from dividends vary too, but not nearly as much, ranging from 5.4% in the 1950s to 1.7% since 2000 – The big return ...
... • Stock Returns: take into account both price changes and dividend income – Returns from capital gains range from an average of 15.3% during the 1990s to -5.3% from 2000–2008 – Returns from dividends vary too, but not nearly as much, ranging from 5.4% in the 1950s to 1.7% since 2000 – The big return ...
Pricing Rate of Return Guarantees in Regular Premium Unit Linked
... correction. Then we show how our setup can be linked with the popular LIBOR Market Model. For long term options typically encountered in life insurance the convexity correction effect of stochastic interest has a high impact on the price of the option. Realizing this, we conjecture that it is of inte ...
... correction. Then we show how our setup can be linked with the popular LIBOR Market Model. For long term options typically encountered in life insurance the convexity correction effect of stochastic interest has a high impact on the price of the option. Realizing this, we conjecture that it is of inte ...
Collateral and Credit Issues in Derivatives Pricing
... risk and consider the implications of the analysis for bid-offer spreads. The expected recovery rates on the derivative for the bank and its counterparty are allowed to be different from that on their other liabilities. One controversial issue, related to credit risk, is whether it is necessary for ...
... risk and consider the implications of the analysis for bid-offer spreads. The expected recovery rates on the derivative for the bank and its counterparty are allowed to be different from that on their other liabilities. One controversial issue, related to credit risk, is whether it is necessary for ...
Data Definitions
... The percentage of bonds in portfolio with credit rating BBB or above. Non Investment Grade The percentage of bonds in portfolio with credit rating B or below. Rel UNII The UNII in cents per share dividend into the annualized income only dividend expressed in cents per share. For example, an 8.34%% f ...
... The percentage of bonds in portfolio with credit rating BBB or above. Non Investment Grade The percentage of bonds in portfolio with credit rating B or below. Rel UNII The UNII in cents per share dividend into the annualized income only dividend expressed in cents per share. For example, an 8.34%% f ...
The implications of herding on volatility. The
... • The results for the measures of historical and realized volatility are very similar, irrespective of which volume proxy is used, and also unanimous. – a higher level of herding (uninformed trading) leads to greater price changes (volatility) • Herding affects current volatility but not expected vo ...
... • The results for the measures of historical and realized volatility are very similar, irrespective of which volume proxy is used, and also unanimous. – a higher level of herding (uninformed trading) leads to greater price changes (volatility) • Herding affects current volatility but not expected vo ...
Investment Analysis and Portfolio Management
... above 2.5 percent (the interest rate on Investment 2). If the liquidity of Investment 3 were high, Investment 3 would match Investment 4 except for investment 3’s shorter maturity. We would then conclude that Investment 3’s interest rate should be less than the interest rate on Investment 4, which i ...
... above 2.5 percent (the interest rate on Investment 2). If the liquidity of Investment 3 were high, Investment 3 would match Investment 4 except for investment 3’s shorter maturity. We would then conclude that Investment 3’s interest rate should be less than the interest rate on Investment 4, which i ...
Asset Pricing with Idiosyncratic Risk and Overlapping Generations
... that any given collection of asset price processes are consistent with a heterogeneous agent economy in which agents have ‘standard’ preferences and face idiosyncratic shocks with a particular volatility process. Their model’s testable restrictions can be thought of in two ways. First, because the e ...
... that any given collection of asset price processes are consistent with a heterogeneous agent economy in which agents have ‘standard’ preferences and face idiosyncratic shocks with a particular volatility process. Their model’s testable restrictions can be thought of in two ways. First, because the e ...
Shorts and Derivatives in Portfolio Statistics
... The strategy of selling securities short is prevalent in specialized portfolios, such as long-short, market-neutral, bear-market, and hedge funds. Most conventional portfolios do not typically short securities, although they may reserve the right to do so under special circumstances. Funds may also ...
... The strategy of selling securities short is prevalent in specialized portfolios, such as long-short, market-neutral, bear-market, and hedge funds. Most conventional portfolios do not typically short securities, although they may reserve the right to do so under special circumstances. Funds may also ...
A Partial Internal Model for Credit and Market Risk Under Solvency II
... insurance products and does not engage in either unit-linked products, asset management or banking activities. The role of traditional insurance contracts is to encourage policyholders to reduce their risks by transferring them to enterprises more willing to bear them, in exchange for a premium. The ...
... insurance products and does not engage in either unit-linked products, asset management or banking activities. The role of traditional insurance contracts is to encourage policyholders to reduce their risks by transferring them to enterprises more willing to bear them, in exchange for a premium. The ...
a century of stock market liquidity and trading
... and Fisher and Weaver (1999), but their existence is not well known. I use all of these printed sources to collect monthly bid-ask spread data on a subset of stocks in the Dow Jones averages. Each monthly spread observation for each stock is entered at least twice using two different sources, one of ...
... and Fisher and Weaver (1999), but their existence is not well known. I use all of these printed sources to collect monthly bid-ask spread data on a subset of stocks in the Dow Jones averages. Each monthly spread observation for each stock is entered at least twice using two different sources, one of ...
Stock Trading Using Analytics - American Institute of Science
... Chandrika Kadirvel Mani and Carol Anne Hargreaves: Stock Trading Using Analytics ...
... Chandrika Kadirvel Mani and Carol Anne Hargreaves: Stock Trading Using Analytics ...
The Effect of New York City Sports Outcomes on the Stock Market
... good are more sensitive to losses (Isen, Nguyen, Ashby 1988). As a result positive affect causes a phenomenon known as cautious optimism. Those who have had positive affect induced overestimate the probability of winning and underestimate the probability of losing, while control groups do not. At th ...
... good are more sensitive to losses (Isen, Nguyen, Ashby 1988). As a result positive affect causes a phenomenon known as cautious optimism. Those who have had positive affect induced overestimate the probability of winning and underestimate the probability of losing, while control groups do not. At th ...
Systemic Risk, Systematic Risk, and the Identification of
... and Spillover Duration. Both measures display a much smaller correlation with systematic risk (26% and -4%, respectively) than MES and the dependence-consistent ΔCoVaR, and are thus better able to distinguish between systemic and systematic risk. By focusing on the persistence of spillovers, we stre ...
... and Spillover Duration. Both measures display a much smaller correlation with systematic risk (26% and -4%, respectively) than MES and the dependence-consistent ΔCoVaR, and are thus better able to distinguish between systemic and systematic risk. By focusing on the persistence of spillovers, we stre ...
Asset Allocation - Columbia Basin Foundation
... Movement away from the current mix may be made by the Investment Manager as a strategic response to the relative attractiveness of various asset classes. The Investment Manager may request an exception to this asset allocation if it is felt to be in the best interest of the Foundation. Affiliate Man ...
... Movement away from the current mix may be made by the Investment Manager as a strategic response to the relative attractiveness of various asset classes. The Investment Manager may request an exception to this asset allocation if it is felt to be in the best interest of the Foundation. Affiliate Man ...
going further to go farther
... with these investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemptions, distributions or optional charg ...
... with these investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemptions, distributions or optional charg ...
Should Monetary Policy Monitor Risk Premiums in Financial Markets?
... households slowed, and inflation eventually fell well below 2 percent. However, GDP growth also began to slow, and the Riksbank eventually reversed all of its policy rate increases. This new decline in GDP growth was likely due in large part to the poor economic performance of the eurozone, Sweden’s ...
... households slowed, and inflation eventually fell well below 2 percent. However, GDP growth also began to slow, and the Riksbank eventually reversed all of its policy rate increases. This new decline in GDP growth was likely due in large part to the poor economic performance of the eurozone, Sweden’s ...
An Economic Perspective on Dividends
... Data shown in this report reflects historical performance which is no guarantee to be reliable, but not guaranteed as to accuracy or completeness. All indices shown are of future results. Dividend yield is one component of performance and should not be unmanaged and unavailable for direct investment ...
... Data shown in this report reflects historical performance which is no guarantee to be reliable, but not guaranteed as to accuracy or completeness. All indices shown are of future results. Dividend yield is one component of performance and should not be unmanaged and unavailable for direct investment ...
The Case for shorT-MaTuriTy, higher QualiTy, high yield
... Using Short-Term High Yield Bonds to Enhance an Overall Fixed Income Portfolio In addition to investing in a dedicated portfolio of short-maturity, higher quality high yield bonds, there are a number of roles these securities can play in broader fixed income portfolios today. Short Duration Credit P ...
... Using Short-Term High Yield Bonds to Enhance an Overall Fixed Income Portfolio In addition to investing in a dedicated portfolio of short-maturity, higher quality high yield bonds, there are a number of roles these securities can play in broader fixed income portfolios today. Short Duration Credit P ...
International Developed Markets Fund
... while he was the lead portfolio manager of the global, international, and emerging markets strategies for Vontobel Asset Management. Mr. Jain launched his own firm, GQG Partners, in June 2016. We have high confidence in Mr. Jain and view the opportunity to be an early investor with the new firm as a ...
... while he was the lead portfolio manager of the global, international, and emerging markets strategies for Vontobel Asset Management. Mr. Jain launched his own firm, GQG Partners, in June 2016. We have high confidence in Mr. Jain and view the opportunity to be an early investor with the new firm as a ...
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.