A theory is developed that explains how the stock market can crash inthe absence of news about fundamentals, and why crashes are more commonthan frenzies. A crash occurs via the interaction of rational and naive investors.Naive traders believe in a simple (but reasonable) statistical modelof...

We explore connections between the certainty equivalent return (CER) functional and theunderlying utility function. Curvature properties of the functional depend upon how utilityfunction attributes relate to Hyperbolic Absolute Risk Aversion (HARA) type utility functions.If the CER functional is...

Der vorliegende Beitrag untersucht die Determinanten der Performance europäischer ArbitrageCollateralized Loan Obligations für das Jahr 2009. Der Fokus liegt dabei auf der Bedeutung derperformanceabhängigen Vergütung des CLO-Managers, den Eigenschaften des CLO-Managersund der...

Vorliegende Studie analysiert die Determinanten der Eigenkapitalrendite deutscher Sparkassen. Die Untersuchungerfolgt auf Basis eines Paneldatensatzes, der die Bilanzdaten sowie regulatorischen Kenngrößen allerSparkassen in Deutschland zwischen 1999 und 2007 beinhaltet. Die Ergebnisse der...

Most time series models used in econometrics and empirical finance are estimated withmaximum likelihood methods, in particular when interest centers on density and Value{at{Risk (VaR) prediction. The standard maximum likelihood principle implicitly placesequal weight on each of the observations...

Consider an investor trading dynamically to maximize expectedutility from terminal wealth. Our aim is to study the dependencebetween her risk aversion and the distribution of the optimal terminalpayo. Economic intuition suggests that high risk aversion leads to arather concentrated distribution,...

An equivalent !-martingale measure (E!MM) for a given stochastic process Sis a probability measure R equivalent to the original measure P such that S isan R-!-martingale. Existence of an E!MM is equivalent to a classical absenceof-arbitrage property of S, and is invariant if we replace the...

chorus of the tragedy which plays on the world stage. The main thesis of our work is that,despite the triumphant rhetoric praising the merits of perfect competition, the global fields ofthe dysfunctional market system have mushroomed in what we call Warrant Economics forthe Free-Market...

We use a user-cost model to study how dispersed information among housing marketparticipants a¤ects the equilibrium house price. In the model, agents are disparatelyinformed about local economic conditions, consume housing services, and speculate onprice changes. Information dispersion leads...

A small strand of recent literature is occupied with identifying simultaneity in multipleequation systems through autoregressive conditional heteroscedasticity. Since thisapproach assumes that the structural innovations are uncorrelated, any contemporaneousconnection of the endogenous variables...