Little is known about the reactions of daily returns on portfolios with different characteristics to unexpected changes in macroeconomic conditions. This paper fills this void by analyzing the reactions of daily returns on portfolios formed on size and book-to-market ratio to news about a wide...

Guasoni (2006) introduced a simple condition for the absence of arbitrage opportunities. In this note we show that his results remain valid under a weaker notion of arbitrage which arises by excluding liquidation costs from the value process of a portfolio

We explore how the demand for a risky asset can be separated into an investment effect and a hedging effect by all risk-averse investors. This question has been shown to be complex when considered outside of the mean-variance framework. We restrict dependence among returns on the risky assets to...

We consider the original Arrow-Lind framework in which a government undertakes a risky project to be shared among many taxpayers. In our model, the taxpayers decide the level of participation in the risky project. Moreover, the amount of taxes collected by the government fully finances the...

Financial markets witness high levels of activity at certain times, but remain calm at others. This makes the flow of physical time discontinuous. Therefore using physical time scales for studying financial time series, runs the risk of missing important activities. An alternative approach is...

The impact of exchange rate uncertainty on international trade has been discussed controversially in economic policy and theory for a long time. The paper surveys the theoretical investigations on this topic. The early modeis which analyse the influence of exchange rate uncertainty on trade,...

We study the effect of an asymmetric environment on risk sharing. In our model, entrepreneurs consider undertaking risky projects in the real sector as well as selling part of their projects to investors. To capture the idea of an asymmetric environment, the returns on the alternative risk-free...

This study re-examines the return-volatility relationship and dynamics under a new VAR framework. By analyzing two model-free implied volatility indices - VIX (the U.S.) and VKOSPI (Korea) - and their corresponding stock market indices, we found an asymmetric volatility phenomenon in both...

The article examines causal relationships between sovereign credit default swaps (CDS) prices for the BRICS and most important EU economies (Germany, France, the UK, Italy, Spain) during the European debt crisis. The cross-correlation function (CCF) approach used in the research distinguishes...

This paper addresses the question of the selection of multivariate GARCH models in terms of variance matrix forecasting accuracy with a particular focus on relatively large scale problems. We consider 10 assets from NYSE and NASDAQ and compare 125 model based one-step-ahead conditional variance...