Time‐varying risk of rare disasters, investment, and asset pricing

2020 ◽  
Vol 55 (3) ◽  
pp. 503-524
Author(s):  
Bo Liu ◽  
Yingjie Niu ◽  
Jinqiang Yang ◽  
Zhentao Zou
Keyword(s):  
Asset Pricing ◽  
Time Varying ◽  
Rare Disasters

Asset pricing with time varying pessimism and rare disasters

2019 ◽  
Vol 60 ◽  
pp. 165-175 ◽  
Author(s):  
Jian Zhang ◽  
Dongmin Kong ◽  
Hening Liu ◽  
Ji Wu
Keyword(s):  
Asset Pricing ◽  
Time Varying ◽  
Rare Disasters

scholarly journals Optimisation of Time-Varying Asset Pricing Models with Penetration of Value at Risk and Expected Shortfall

Mathematics ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 394
Author(s):  
Adeel Nasir ◽  
Kanwal Iqbal Khan ◽  
Mário Nuno Mata ◽  
Pedro Neves Mata ◽  
Jéssica Nunes Martins
Keyword(s):  
At Risk ◽  
Asset Pricing ◽  
Stock Returns ◽  
Value At Risk ◽  
Expected Shortfall ◽  
Time Varying ◽  
Pricing Models ◽  
Asset Pricing Model ◽  
Asset Pricing Models ◽  
Market Beta

This study aims to apply value at risk (VaR) and expected shortfall (ES) as time-varying systematic and idiosyncratic risk factors to address the downside risk anomaly of various asset pricing models currently existing in the Pakistan stock exchange. The study analyses the significance of high minus low VaR and ES portfolios as a systematic risk factor in one factor, three-factor, and five-factor asset pricing model. Furthermore, the study introduced the six-factor model, deploying VaR and ES as the idiosyncratic risk factor. The theoretical and empirical alteration of traditional asset pricing models is the study’s contributions. This study reported a strong positive relationship of traditional market beta, value at risk, and expected shortfall. Market beta pertains its superiority in estimating the time-varying stock returns. Furthermore, value at risk and expected shortfall strengthen the effects of traditional beta impact on stock returns, signifying the proposed six-factor asset pricing model. Investment and profitability factors are redundant in conventional asset pricing models.

Tests of Asset Pricing with Time-Varying Expected Risk Premiums and Market Betas

1987 ◽  
Vol 42 (2) ◽  
pp. 201-220 ◽  
Author(s):  
WAYNE E. FERSON ◽  
SHMUEL KANDEL ◽  
ROBERT F. STAMBAUGH
Keyword(s):  
Asset Pricing ◽  
Time Varying ◽  
Risk Premiums

Diffusion Coefficient Estimation and Asset Pricing When Risk Premia and Sensitivities Are Time Varying

1993 ◽  
Vol 3 (2) ◽  
pp. 85-99 ◽  
Author(s):  
Marc Chesney ◽  
Robert J. Elliott ◽  
Dilip Madan ◽  
Hailiang Yang
Keyword(s):  
Diffusion Coefficient ◽  
Asset Pricing ◽  
Risk Premia ◽  
Time Varying ◽  
Coefficient Estimation

Equity Is Cheap for Large Financial Institutions

2020 ◽  
Vol 33 (9) ◽  
pp. 4231-4271 ◽  
Author(s):  
Priyank Gandhi ◽  
Hanno Lustig ◽  
Alberto Plazzi
Keyword(s):  
Asset Pricing ◽  
Financial Crises ◽  
Capital Regulation ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
Oxford University ◽  
Rare Disasters ◽  
Country Characteristics ◽  
Nonfinancial Firms ◽  
Published Paper

Abstract Across a wide panel of countries, the top-10% of financial stocks on average account for over 20% of a country’s market capitalization but earn on average significantly lower returns than do nonfinancial firms of the same size and risk exposures. In a bailout-augmented, rare disasters asset pricing model, the spread in risk-adjusted returns between large and small institutions depends on country characteristics that determine the likelihood of bailouts. Consistent with this model, we find larger spreads in countries with large and interconnected financial sectors, weaker capital regulation and corporate governance, and fiscally stronger governments. Valuation gaps increase in anticipation of financial crises. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

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