In a recent book, Kolari et al. developed a new theoretical capital asset pricing model dubbed the ZCAPM. Based on out-of-sample cross-sectional tests using U.S. stocks, the ZCAPM consistently outperformed well-known multifactor models popular in the...
In this paper, we consider asset pricing models under the multivariate t-distribution with finite second moment. Such a distribution, which contains the normal distribution, offers a more flexible framework for modeling asset returns. The main object...
We clear up an ambiguity in the statement of the GRS statistic by providing the correct formula of the GRS statistic and the first proof of its F-distribution in the general multiple-factor case. Casual generalization of the Sharpe-ratio-based interp...
In this article, we test the capital asset pricing model (CAPM) on the Warsaw Stock Exchange (WSE) by measuring the performance of two portfolios composed of construction firms: family-controlled and nonfamily controlled. These portfolios were select...
The central aim of this paper is to provide a baseline framework for describing the evolution of an affordability indicator at a district level, before and after the financial crisis of 2008. From the mid-1990s to 2019 house price-earnings ratio for...
The development of China’s coal power industry is accompanied by various environmental risks. In this paper, typical coal power enterprises are taken as examples to establish a tool for environmental cost internalization and environmental risk...
In this paper, we test the applicability of different Fama–French (FF) factor models in Vietnam, we investigate the value factor redundancy and examine the choice of the profitability factor. Our empirical evidence shows that the FF five-factor model...
Recent literature shows that many testing procedures used to evaluate asset pricing models result in spurious rejection probabilities. Model misspecification, the strong factor structure of test assets, or skewed test statistics largely explain this....
A long-standing issue in mathematical finance is the speed-up of option pricing, especially for multi-asset options. A recent study has proposed to use tensor train learning algorithms to speed up Fourier transform (FT)-based option pricing, utilizin...
Sentiment and extrapolation are ubiquitous in the financial market, and they are not only the embodiment of human nature, but also the primary drivers of asset price bubbles. In this study, we first constructed a theoretical model that included funda...
Recent literature shows that market anomalies have significantly diminished, while research on market factors has largely improved the performance of asset pricing models. In this paper we study the extent to which data envelopment analysis (DEA) tec...
This paper examines the use of the return on gold instead of treasury bills in empirical asset pricing models for the US equity market. It builds upon previous research on the safe-haven, hedging, and zero-beta characteristics of gold in developed ma...
This paper reviews the finite difference method (FDM) for pricing interest rate derivatives (IRDs) under the Hull–White Extended Vasicek model (HW model) and provides the MATLAB codes for it. Among the financial derivatives on various underlyin...
This paper investigates the ability of asset pricing models to explain the cross-section of average stock returns of anomaly portfolios. A large sample of 286 anomaly portfolios are employed. We perform out-of-sample cross-sectional regression tests...
This paper presents the first rigorous empirical investigation into a fundamental question of cryptocurrency valuation: Are cryptocurrency prices in line with the prices of fundamental assets? To answer this, we analyze the nine largest cryptocurrenc...
16 January 2023
Environmental pollution liability insurance is becoming increasingly important for China to achieve its emission reduction targets. Insurance pricing is a crucial factor restricting the market share of environment pollution liability insurance, from...
The Chinese stock market is replete with numerous omitted variables that can introduce biases in the standard estimation of risk premiums when traditional linear asset pricing models are applied. The three-pass method enables the estimation of risk p...
Pricing multi-asset options has always been one of the key problems in financial engineering because of their high dimensionality and the low convergence rates of pricing algorithms. This paper studies a method to accelerate Monte Carlo (MC) simulati...
This paper offers an empirical characterization of the relation between the international price of oil and exchange rates that is both useful and reliable. Our characterization is useful because it rests on information of asset prices that are determ...
We examine the relationship between gold prices and the U.S. dollar exchange rate, arguing that their interactions are state-dependent and asymmetric under different market conditions. State dependency hinges on different short-term interest rate zon...
We present a modelling approach for sector asset pricing studies that incorporates sector-level risk factors, subgroup portfolios, and structural breakpoint tests that are better at isolating the time-varying nature and the firm-specific component of...
The weighted Monte Carlo method is an elegant technique to calibrate asset pricing models to market prices. Unfortunately, the accuracy can drop quite quickly for out-of-sample options as one moves away from the strike range and maturity range of the...
The performance of volatility-based trading strategies depends, among other factors, on the asset selection and the associated risk preference. For this study, we conducted a representative survey for Germany to determine the asset preferences of ind...
We evaluate the use of generalized empirical likelihood (GEL) estimators in portfolio efficiency tests for asset pricing models in the presence of conditional information. The use of conditional information is relevant to portfolio management as it a...
Forecasting stock market returns has great significance to asset allocation, risk management, and asset pricing, but stock return prediction is notoriously difficult. In this paper, we combine the sum-of-the-parts (SOP) method and three kinds of econ...
This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize conditional value-at-risk and investigate two performance attributes, asset allocation (AA) and the sel...
This paper investigates the pricing formula for barrier options where the underlying asset is driven by the sub-mixed fractional Brownian motion with jump. By applying the corresponding Ito^’s formula, the B-S type PDE is derived by a self-fina...
This paper searches for stochastic trends and returns predictability in key energy asset markets in Europe over the last decade. The financial assets include Intercontinental Exchange Futures Europe (ICE-ECX) carbon emission allowances (the main driv...
Bitcoin has attracted attention from different market participants due to unpredictable price patterns. Sometimes, the price has exhibited big jumps. Bitcoin prices have also had extreme, unexpected crashes. We test the predictive power of a wide ran...
The aim of this study is to test the ability of the yield curve on US government bonds to forecast the future evolution in the prices of commodities often used in as raw materials. We consider the monthly prices of nine commodities for more than 30 y...
In this research, we summarize the results of implementing the market risk premium into the option valuation formulas of the Black–Scholes–Merton model for out-of-the-money (OTM) options. We show that derivative prices can partly depend o...
We empirically test predictability on asset price using stock selection rules based on maximum drawdown and its consecutive recovery. In various equity markets, monthly momentum- and weekly contrarian-style portfolios constructed from these alternati...
One of the main characteristics of the (recently proposed) non-arbitrage valuation of equities framework is the reduction in pricing subjectivity. This is evidenced in terms of the dividends discount rate and the outlook of future performance (divide...
This paper explores the implications of consumption heterogeneity between domestic and foreign investors on the cross-section of stock returns in a host country. We argue that foreign investors in a small open economy integrated into global financial...
In recent years, the bitcoin market has developed rapidly and has been recognized as a new type of gold by many investors. It may replace gold as a hedge against inflation and become a new investment asset for financial management. The investment rel...
In this paper, the pricing performance of the generalised autoregressive conditional heteroskedasticity (GARCH) option pricing model is tested when applied to Bitcoin (BTCUSD). In addition, implied volatility indices (30, 60-and 90-days) of BTCUSD an...
In this paper, we present the results of nonlinearity detection in Hedge Fund price returns. The main challenge is induced by the small length of the time series, since the return of this kind of asset is updated once a month. As usual, the nonlinear...
9 October 2019
Financial innovation by means of Fintech firms is one of the more disruptive business model innovations from the latest years. Specifically, in the financial advisor sector, worldwide assets under management of artificial intelligence (AI)-based inve...
Volatility, which represents the magnitude of fluctuating asset prices or returns, is used in the problems of finance to design optimal asset allocations and to calculate the price of derivatives. Since volatility is unobservable, it is identified an...
Financial liabilities, as an important part of the capital structure, are closely related to the value creation and scale of growth of a company. To test whether financial liabilities affect the “size effect” of company value, this paper...
This paper deals with the economics of gasification facilities in general and IGCC power plants in particular. Regarding the prospects of these systems, passing the technological test is one thing, passing the economic test can be quite another. In t...
We study fluctuations in stock prices using a framework derived from the present value model augmented with a macroeconomic factor. The fundamental value is derived as the expected present discounted value of broad dividends that include, in addition...
Food price bubbles are a phenomenon in which the cost of some food items or food commodities climbs quickly and unreasonably before collapsing due to reasons such as speculation, supply and demand imbalances, meteorological occurrences, and governmen...
Price discovery is an important research topic in real estate due to the heterogeneous nature of housing attributes and relatively thin trading activities compared to other assets. In Commonwealth countries, including New Zealand, governments usually...
Understanding structural regime shifts in crypto asset markets is vital for early detection of systemic risk. This study applies the Generalized Sup Augmented Dickey–Fuller (GSADF) test to daily high-frequency price data of five major crypto as...
The main purpose of the paper is to analyze the conditional correlations, conditional covariances, and co-volatility spillovers between international crude oil and associated financial markets. The prices of oil and its interactions with financial ma...
This paper examines the trading performances of several technical oscillators created using crypto-asset pricing methods for short-term bitcoin trading. Seven pricing models proposed in the professional and academic literature were transformed into o...
The study of the dependences between different assets is a classic topic in financial literature. To understand how the movements of one asset affect to others is critical for derivatives pricing, portfolio management, risk control, or trading strate...
Currently, the most popular cryptocurrency is bitcoin. Predicting the future value of bitcoin can help investors to make more educated decisions and to provide authorities with a point of reference for evaluating cryptocurrency. The novelty of the pr...
The primary contribution of this paper is to establish that the long-swings behavior observed in the market price of Danish housing since the 1970s can be understood by studying the interplay between short-term expectation formation and long-run equi...
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