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Capital Asset Pricing Model (18 results)
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- Performance Evaluation and Conditioning Information: The Case of Hedge Funds
- It is common to measure hedge fund performance within the context of static asset pricing models. Because hedge fund managers follow highly opportunistic strategies, however, we argue that it might be inappropriate to assume that the risk and performance measures of hedge funds are constant. Consequently, we estimate abnormal performance...
- Case studies
- Risk Management With Stress Testing: Implications For Portfolio Selection And Asset Pricing
- Stress Testing ST is often used by banks and securities firms to set risk exposure limits. Accordingly, a model is examined with an agent who faces K binding ST constraints and another who does not. Four results were obtained. First, the constrained agent's optimal portfolio exhibits (K+2)-fund separation. Second, the...
- White papers 2006-06-22
- Tax Changes and Asset Pricing: Time-Series Evidence
- The effective tax rate on equity securities has fluctuated considerably in the U.S. between 1917-2004. This study investigates whether personal taxes on equity securities are related to stock valuations using the time-series variation in tax burdens. The paper finds an economically and statistically significant relationship between asset valuations and personal...
- White papers 2005-11-01
- Expected Returns, Yield Spreads, and Asset Pricing Tests
- This paper uses yield spreads to construct ex-ante returns on corporate securities, and then use the ex-ante returns in asset pricing assets. Differently from the standard approach, the tests do not use ex-post average returns as a proxy for expected returns. It finds that the market beta plays a much...
- White papers 2005-05-01
- Asset Pricing and Fund Valuation Practices in the Hedge Fund Industry
- The hedge fund industry has experienced considerable and steady growth in recent years, both in terms of the number of funds and the assets under management. With this development has come a growing focus from investors on the more complex hedge fund strategies and the manner in which the portfolios...
- White papers 2005-04-01
- Parametric Portfolio Policies: Exploiting Characteristics in the Cross Section of Equity Returns
- The paper proposes a novel approach to optimizing portfolios with large numbers of assets. It models directly the portfolio weight in each asset as a function of the asset's characteristics. The approach is computationally simple, easily modified and extended, produces sensible portfolio weights, and offers robust performance in and out...
- White papers 2004-12-01
- Asset Pricing With Liquidity Risk
- This paper solves explicitly an equilibrium asset-pricing model with liquidity risk - the risk arising from unpredictable changes in liquidity over time. In our liquidity-adjusted capital asset pricing model, a security's required return depends on its expected liquidity as well as on the covariance of its own return and liquidity...
- White papers 2004-09-01
- The Growth Optimal Asset
- The purpose of this paper is to derive an asset pricing model based on a growth optimal portfolio, in a market where there are multiple regimes, and to estimate the risk premiums of J-REITs based on this theory. In an asset pricing model employing a regime switching model, two equations...
- White papers 2004-08-26
- Ambiguity, Information Quality and Asset Pricing
- When ambiguity averse investors process news of uncertain quality, they act as if they take a worst-case assessment of quality. As a result, they react more strongly to bad news than to good news. They also dislike assets for which information quality is poor, especially when the underlying fundamentals are...
- White papers 2004-05-27
- Insurance and Asset Pricing in Incomplete Markets With Heavy Tailed Risks
- A model for pricing risks in incomplete markets using prices for traded assets and allowing for heavy tailed risks is developed. The approach used is based on an approximation that collapses to the CAPM for multi normal portfolios. The pricing result is derived as an approximation using elliptical distributions and...
- White papers 2004-05-18
- Using Expectations to Test Asset Pricing Models
- This paper employs analysts' expected rates of return and provides evidence on the relation between these expectations and firm attributes. The assumption that these expectations are unbiased estimates of market-wide expected rates of return allows circumventing the use of realized rates of return and providing evidence on the predictions emanating...
- White papers 2004-05-01
- Time-Varying Macroeconomic Risk and Commercial Real Estate: An Asset Pricing Perspective
- This paper empirically investigates the behavior over time of excess returns risk premium on commercial real estate. Specifically, the first and second conditional moments on office and retail real estate excess returns are related to the conditional variances and covariances of five specified macroeconomic factors: growth rate in gross domestic...
- White papers 2004-04-20
- Financial Claustrophobia: Asset Pricing in Illiquid Markets
- There are many examples of markets where an agent who wants to get out of an investment position quickly may find himself trapped and forced to remain in that position because of a lack of liquidity. The paper studies the asset-pricing implications when agents cannot always buy and sell assets...
- White papers 2004-04-01
- The Price Is (Almost) Right
- Most previous research tests market efficiency and asset pricing models using average abnormal trading profits on dynamic trading strategies, and typically rejects the joint hypothesis. This article measures the ability of a simple risk model and the efficient-market hypothesis to explain the level of stock prices. First, it finds that...
- White papers 2003-12-01
- A Blueprint for Corporate Governance
- If the top business schools offered a Ph.D. in corporate governance, their textbooks would cover subjects that extend far beyond recent accounting scandals and the resulting legislation. They would put governance in a historical context to show how problems arose. They would examine factors that make markets inefficient. They would...
- White papers 2003-11-01
- A Parsimonious Macroeconomic Model for Asset Pricing: Habit Formation or Cross-sectional Heterogeneity?
- This paper studies the asset pricing implications of a parsimonious two-agent macroeconomic model with two key features: limited participation in the stock market and heterogeneity in the elasticity of inter-temporal substitution. The parameter values for the model are taken from the business cycle literature and, in particular, are not calibrated...
- White papers 2003-09-01
- An Equilibrium Model Of Asset Pricing And Moral Hazard
- Using the Capital Asset Pricing Model CAPM as a benchmark, this article develops an integrated model of asset pricing and moral hazard. The expected excess returns for risky assets, optimal contracts for managers agents that involve relative performance, and equilibrium asset prices are explicitly characterized. It is shown that the...
- White papers 2003-08-10
- The Capital Asset Pricing Model: Theory and Evidence
- The capital asset pricing model CAPM of William Sharpe (1964) and John Lintner (1965) marks the birth of asset pricing theory (resulting in a Nobel Prize for Sharpe in 1990). Before their breakthrough, there were no asset pricing models built from first principles about the nature of tastes and investment...
- White papers 2003-08-01
- Housing, Consumption, and Asset Pricing
- This paper builds an equilibrium asset pricing model with housing consumption. Agents care about the composition of a consumption basket that contains shelter and other goods. The presence of composition risk increases the mean and variance of excess stock returns and lowers the risk free rate. Stock prices exhibit mean...
- White papers 2003-05-01
- Dynamic Strategies, Asset Pricing Models, And The Out-Of-Sample Performance Of The Tangency Portfolio
- This paper study the behavior of an investor with unit risk aversion who maximizes a utility function defined over the mean and the variance of a portfolio’s return. Conditioning information is accessible without cost and an unconditionally risk less asset is available in the market. The proposed approach makes it...
- White papers 2003-02-01
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