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| Author | : Takeshi Yamada |
| Publisher | : |
| Total Pages | : 106 |
| Release | : 1993 |
| Genre | : Stockholders |
| ISBN | : |
| Author | : David Weinbaum |
| Publisher | : |
| Total Pages | : 34 |
| Release | : 2009 |
| Genre | : |
| ISBN | : |
We provide an explicit characterization of the equilibrium when investors have heterogeneous risk preferences. Given market completeness, investors can achieve full risk sharing. Thus a representative agent can be constructed, though this agent's risk aversion changes over time as the relative wealths of the individual investors change. We show that volatility depends on the covariance of aggregate risk aversion and stock returns. We find that heterogeneity increases volatility, produces volatility clustering (ARCH effects) and quot;leveragequot;-like effects. Option prices exhibit implied volatility skews. There is predictability and we assess the magnitude of investors' hedging demands and trading volume. Further, diversity is beneficial to all agents and entails welfare gains that can be substantial.
| Author | : Günter Franke |
| Publisher | : |
| Total Pages | : 68 |
| Release | : 2003 |
| Genre | : Capital assets pricing model |
| ISBN | : |
| Author | : Andrew Wen-Chuan Lo |
| Publisher | : |
| Total Pages | : |
| Release | : 2001 |
| Genre | : |
| ISBN | : |
| Author | : Thorsten Hens |
| Publisher | : Elsevier |
| Total Pages | : 607 |
| Release | : 2009-06-12 |
| Genre | : Business & Economics |
| ISBN | : 0080921434 |
The models of portfolio selection and asset price dynamics in this volume seek to explain the market dynamics of asset prices. Presenting a range of analytical, empirical, and numerical techniques as well as several different modeling approaches, the authors depict the state of debate on the market selection hypothesis. By explicitly assuming the heterogeneity of investors, they present models that are descriptive and normative as well, making the volume useful for both finance theorists and financial practitioners. Explains the market dynamics of asset prices, offering insights about asset management approaches Assumes a heterogeneity of investors that yields descriptive and normative models of portfolio selections and asset pricing dynamics
| Author | : Julan Du |
| Publisher | : |
| Total Pages | : 45 |
| Release | : 2002 |
| Genre | : |
| ISBN | : |
This paper develops a behavioral finance model that may explain underreaction and overreaction in asset markets from the perspective of heterogeneous investors with different confidence levels. The model explains the occurrence of underreaction by the sequential entry of investors with different confidence levels in interpreting earnings shocks. When the average investor confidence level is high enough, owing to the stochastic nature of the fundamental value and the change in order flow and trading volume, it is likely for asset price to overshoot what the fundamental value warrants, leading to overreaction and negative autocorrelation of asset returns. It is shown that in repeated trading episodes with repeated earnings shocks, the average investor confidence level would be higher as a result of the biased self-attribution and confirmatory bias, causing overreaction more likely to occur. Also, the higher average confidence level of investors gauged by the later timing of winding up their asset holding positions also makes overreaction more likely to occur.
| Author | : Roni Michaely |
| Publisher | : |
| Total Pages | : |
| Release | : 2000 |
| Genre | : |
| ISBN | : |
This paper analyzes the relationship between tax heterogeneity and the behavior of stock prices and trading volume around the ex-dividend day within an equilibrium framework. We conclude that, even in a world without transaction costs, the price drop on the ex-day need not be equal to the dividend amount. Our model accounts for the higher market trading volume around the ex-day, and shows this to be a function of tax heterogeneity among traders. We show that the volume of trade around the ex-day contains information about investors' tax preferences above and beyond the information contained in the ex-day price alone. Consistent with the model's predictions, our empirical analysis reveals that as the risk associated with the ex-dividend day increases, or tax heterogeneity decreases, trading volume decreases.
| Author | : Andrew W. Lo |
| Publisher | : |
| Total Pages | : 65 |
| Release | : 2009 |
| Genre | : |
| ISBN | : |
We derive an intertemporal capital asset pricing model with multiple assets and heterogeneous investors, and explore its implications for the behavior of trading volume and asset returns. Assets contain two types of risks: market risk and the risk of changing market conditions. We show that investors trade only in two portfolios: the market portfolio, and a hedging portfolio, which allows them to hedge the dynamic risk. This implies that trading volume of individual assets exhibit a two-factor structure, and their factor loadings depend on their weights in the hedging portfolio. This allows us to empirically identify the hedging portfolio using volume data. We then test the two properties of the hedging portfolio: its return provides the best predictor of future market returns and its return together with the return of the market portfolio are the two risk factors determining the cross-section of asset returns.
| Author | : John Heaton |
| Publisher | : Forgotten Books |
| Total Pages | : 40 |
| Release | : 2017-12-15 |
| Genre | : Business & Economics |
| ISBN | : 9780332906522 |
Excerpt from The Importance of Investor Heterogeneity and Financial Market Imperfections for the Behavior of Asset Prices In this section we present a series of incomplete market models in order to systematically show how various forms of market frictions can affect predicted asset prices. In particular, we investigate the effects of non-contractable shocks to individual income, the persistence and conditional volatility of these individual shocks, borrowing and short sales constraints, and transactions costs in asset markets. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
| Author | : Jean Paul Theler |
| Publisher | : |
| Total Pages | : 24 |
| Release | : 1994 |
| Genre | : |
| ISBN | : |
