Forward exchange rate unbiasedness is rejected in tests from the current floating exchange rate era. This paper surveys advances in this area since the publication of Hodrick's (1987) survey. It documents that the change in the future exchange rate is generally negatively related to the forward discount. Properties of the expected forward forecast error are reviewed. Issues such as the relation...

We consider an Arrow-Debreu economy in which expected-utility-maximizing agents are sensitive to regret. According to regret theory, the marginal utility of their consumption is increasing in the maximum payoff that they could have obtained if they would have made another choice ex ante. We show that regret biases the optimal portfolio allocation towards assets that perform particularly well in...

This paper presents dynamic portfolio model based on the Merton's optimal investment-consumption model, which combines dynamic synthetic put option using risk-free and risky assets. This paper is extended version of methodological paper published by Yuan Yao (2012). Because of the long history of the development of foreign financial market, with a variety of financial derivatives, the study on ...

This study explores the conditional version of capital asset pricing model on sentiment to provide a behavioural intuition behind value premium and market mispricing. We find betas (β) risk vary over time across different indices portfolios. More importantly, state β derived from this sentiment-scaled provides explanation set anomalies driven by Different static β–return relation that gives fla...

The intertemporal capital asset pricing model of Merton (1973) is examined using the dynamic conditional correlation (DCC) model of Engle (2002). The mean-reverting DCC model is used to estimate a stock’s (portfolio’s) conditional covariance with the market and test whether the conditional covariance predicts time-variation in the stock’s (portfolio’s) expected return. The risk-aversion coeffic...

Regulation of insurers has focused primarily on insurer solidity.1 The concern for solidity centers on safe capitalization requirements for insurers, premium rate adequacy, and investment controls. Although current regulatory concerns frequently address issues of pricing equity and new approaches to risk classification, solidity remains the principal consideration. Capital adequacy, a key solid...

We investigate the extent to which a parsimonious measure of maximum likely loss that captures tail risk returns—known as value-at-risk (VaR)—explains relationship between accruals and cross-sectional dispersion expected stock returns. construct portfolios based on Sloan’s (Account Rev 71(3):289–315, 1996) total (TA) individual asset-level VaR, reflects dynamic behavior asset distribution. docu...