The coupled nonlinear volatility and option pricing model presented recently by Ivancevic is investigated, which generates a leverage effect, i.e., stock volatility is (negatively) correlated to ...stock returns, and can be regarded as a coupled nonlinear wave alternative of the Black–Scholes option pricing model. In this Letter, we analytically propose vector financial rogue waves of the coupled nonlinear volatility and option pricing model without an embedded w-learning. Moreover, we exhibit their dynamical behaviors for chosen different parameters. The vector financial rogue wave (rogon) solutions may be used to describe the possible physical mechanisms for the rogue wave phenomena and to further excite the possibility of relative researches and potential applications of vector rogue waves in the financial markets and other related fields.
► We investigate the coupled nonlinear volatility and option pricing model. ► We analytically present vector financial rogue waves. ► The vector financial rogue waves may be used to describe the extreme events in financial markets. ► This results may excite the relative researches and potential applications of vector rogue waves.
A Behavioral Approach to Asset Pricing Theory examines the reigning assumptions of asset pricing theory and reconstructs them to incorporate findings from behavioral finance. It constructs a solid, ...intact structure that challenges classic assumptions and at the same time provides a strong theory and efficient empirical tools. Building on the models developed by both traditional asset pricing theorists and behavioral asset pricing theorists, this book takes the discussion to the next step. The author provides a general behaviorally based intertemporal treatment of asset pricing theory that extends to the discussion of derivatives, fixed income securities, mean- variance efficient portfolios, and the market portfolio.The book develops a series of examples to illustrate the theoretical results. The CD-ROM contains most of the examples, worked out as Excel spreadsheets, so that a diligent reader can follow them through. Instructors might also want to use the examples to assign class exercises, asking students to modify the numbers and see what happens.* The first book to focus completely on how behavioral finance principles affect asset pricing * Hersh Shefrin is a recognized expert in behavioral finance * Behavioral finance is a growth area in finance scholarship and moving more and more into practice
This book shows how current and recent market prices convey information about the probability distributions that govern future prices. Moving beyond purely theoretical models, Stephen Taylor applies ...methods supported by empirical research of equity and foreign exchange markets to show how daily and more frequent asset prices, and the prices of option contracts, can be used to construct and assess predictions about future prices, their volatility, and their probability distributions.
As the environmental issues become increasingly severe, great attention has been paid to the development of electric vehicles. In order to better develop the green economy, this paper studies a ...supply-chain system under policy intervention, which is composed of strategic customers, the government, two manufacturers which respectively produce electric vehicles and fuel vehicles. The paper aims to research the impacts of pricing time on profitability and stability. The different timing patterns of pricing divide into two game structures, namely Stackelberg pricing game and simultaneous pricing game. With the adjustment of parameters, the state of the system is switched between stability and instability, so some effective methods are lead-in to analysis it. Analytic results reveal how subsidy and carbon emission constraint affect supply-chain system operation, since the whole market operation lasts for a long term, subsidy may always have negative impact on the system's stability, which may drive the system operation to be uncontrollable. By comparison, Stackelberg pricing strategy with characteristics of time-delay is more adaptable for system operational management, which makes the system more flexible to adjust supply-chain system status in time.
•Two competitive vehicle market game models were analyzed complexity and solutions.•The dynamic complexity system integrated information entropy variation.•The structure of two models has significant influence on complexity of system.•The sequential pricing model has more stable range by its flexibility of time delay.•Appropriate subsidy of government will support the development of electric vehicle.
This paper analyzes the asset pricing and portfolio implications of an important barrier to sustainable investing: uncertainty about the corporate ESG profile. In equilibrium, the market premium ...increases and demand for stocks declines under ESG uncertainty. In addition, the CAPM alpha and effective beta both rise with ESG uncertainty and the negative ESG-alpha relation weakens. Employing the standard deviation of ESG ratings from six major providers as a proxy for ESG uncertainty, we provide supporting evidence for the model predictions. Our findings help reconcile the mixed evidence on the cross-sectional ESG-alpha relation and suggest that ESG uncertainty affects the risk-return trade-off, social impact, and economic welfare.
Despite abundant research on modeling hotel room prices, traditional hedonic pricing models (HPMs) have failed to consider spatial variations in the relationships among hotel room price and attribute ...variables. This study demonstrates the utility of a spatial HPM (s-HPM) using a geographically weighted regression analysis of 387 hotels in the Chicago area. Specifically, this study explored spatial variations in modeling hotel room prices and further identified spatial clustering patterns of relationships between room price and hotel attributes across market segments. The findings reveal that the s-HPM successfully identified spatially varying relationships between room price and hotel attributes, such as site attributes – size, age, class and service quality – and situation attributes – distances to airports, highways and tourist attractions – across the study area. This study contributes to a better understanding of local patterns of modeling room prices, ultimately providing guidelines for effective location-based hotel room pricing strategies.
A five-factor asset pricing model Fama, Eugene F.; French, Kenneth R.
Journal of financial economics,
04/2015, Volume:
116, Issue:
1
Journal Article
Peer reviewed
A five-factor model directed at capturing the size, value, profitability, and investment patterns in average stock returns performs better than the three-factor model of Fama and French (FF, 1993). ...The five-factor model׳s main problem is its failure to capture the low average returns on small stocks whose returns behave like those of firms that invest a lot despite low profitability. The model׳s performance is not sensitive to the way its factors are defined. With the addition of profitability and investment factors, the value factor of the FF three-factor model becomes redundant for describing average returns in the sample we examine.
The world price of liquidity risk Lee, Kuan-Hui
Journal of financial economics,
2011, 2011-1-00, 20110101, Volume:
99, Issue:
1
Journal Article
Peer reviewed
This paper empirically tests the liquidity-adjusted capital asset pricing model of
Acharya and Pedersen (2005) on a global level. Consistent with the model, I find evidence that liquidity risks are ...priced independently of market risk in international financial markets. That is, a security’s required rate of return depends on the covariance of its own liquidity with aggregate local market liquidity, as well as the covariance of its own liquidity with local and global market returns. I also show that the US market is an important driving force of global liquidity risk. Furthermore, I find that the pricing of liquidity risk varies across countries according to geographic, economic, and political environments. The findings show that the systematic dimension of liquidity provides implications for international portfolio diversification.
When the cost of hedging is nil, the conditional capital asset pricing model (CAPM) holds. We empirically test the conditional CAPM by regressing asset returns onto the product of their conditional ...betas and market returns. Estimated intercepts are not statistically different from zero, implying that the conditional CAPM successfully explains the conditional level of asset returns. Yet, unconditional betas do not explain the cross section of average asset returns; the unconditional CAPM fails. We show why and how the success of the conditional CAPM actually explains the failure of the unconditional CAPM, thereby rationalizing the coexistence of these two intriguing results.
This paper was accepted by Gustavo Manso, finance.
Funding:
The University of Texas at Dallas and the University of Toronto provided financial support.
Supplemental Material:
The data files and online appendix are available at
https://doi.org/10.1287/mnsc.2022.4381
.
Written by one of the leading experts in the field, this book focuses on the interplay between model specification, data collection, and econometric testing of dynamic asset pricing models. The first ...several chapters provide an in-depth treatment of the econometric methods used in analyzing financial time-series models. The remainder explores the goodness-of-fit of preference-based and no-arbitrage models of equity returns and the term structure of interest rates; equity and fixed-income derivatives prices; and the prices of defaultable securities.
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