Using Shafer and Vovk’s game-theoretic framework for probability, we derive a capital asset pricing model from an efficient market hypothesis, with no assumptions about the beliefs or preferences of investors. Our efficient market hypothesis says that a speculator with limited means cannot beat a particular index by a substantial factor. The model we derive says that the difference between the ...

When consumption betas of stocks are computed using year-over-year consumption growth based upon the fourth quarter, the consumption-based asset pricing model (CCAPM) explains the cross-section of stock returns as well as the Fama and French (1993) three-factor model. The CCAPM's performance deteriorates substantially when consumption growth is measured based upon other quarters. For the CCAPM ...

This paper shows how differences across countries of 1) inflation rates, 2) consumption baskets of investors, and 3) investment opportunity sets of investors matter when one applies capital asset pricing models in an international setting. In particular, the fact that countries differ is shown to affect the portfolio held by investors, the equilibrium expected returns of risky assets, and the f...

Information, Diversification, and Cost of Capital We study the pricing implications of information in a noisy rational expectations model with a factor structure for multi-asset payoffs. There are two classes of price taking investors in our model; informed investors who receive private signals on asset payoffs, and uninformed investors who draw imperfect inferences about those signals from pri...

The online version of A Behavioral Approach to Asset Pricing by Hersh Shefrin. Part III: Developing Behavioral Asset Pricing Models.A unified behavioral approach to asset pricing requires a general definition of sentiment. Objective pdf and the individual investors subjective pdf. ÂœA mathematical-economist-turned-behavioral-economist, Hersh Shefrin challenges and delights the reader by applyin...

The growing share of financial assets that are held and managed by large institutional investors whose trades move prices contradicts the traditional asset pricing paradigm which assumes markets are competitive with small price-taking players. This paper relaxes the traditional price-taking assumption and instead presents a dynamic multi-asset, multi-large participant model of imperfect competi...

capital asset pricing, as one of the basic theories in finance and investment area, develop a model for estimation of expected rate of return and equity cost of capital. this model has many applications in the field of finance. one of anomalies in the capital asset pricing model is the value premium that its proponents believe this risk premium is compensation for a risk not mentioned in origin...

W develop a global equilibrium asset pricing model assuming that investors suffer from foreign aversion, a preference for home assets based on familiarity. Using a utility formulation inspired by regret theory, we derive closed-form solutions. When the degree of foreign aversion is high in a given country, investors place a high valuation on domestic equity, which results in a low expected retu...

The purpose of this study was to examine the expected returns of Carhart model compared to the capital asset pricing model and the implicit capital cost model based on cash and capital returns of growth and value stocks. The statistical population consisted of the companies listed in Tehran Stock Exchange and the time domain is between 2007 and 2016. By choosing Cochran sampling, 126 companies ...