Over the last four decades, the average Gaussian-risk-adjusted return on a stock portfolio that goes long in the largest banks and short in the smallest banks is minus 7 %. Moreover, this portfolio provides US investors with insurance against recessions, even though the cash flows of large banks seem more exposed to macroeconomic risk. Using the rare events model of ?, we interpret the 7% as a ...

Habit formation has been proposed as a possible solution to the equity premium puzzle. This paper extends the class of models that support the habits explanation in order to account for heterogeneity in earnings, wealth, habits and consumption. I find that habit formation does indeed increase the equity premium. However, contrary to earlier results, the habit hypothesis does not imply a price f...

Using 5-minute high frequency data from the Chinese stock market, we employ a non-parametric method to estimate Fama-French portfolio realized jumps and investigate whether the estimated positive, negative and sign realized jumps could forecast or explain the cross-sectional stock returns. The Fama-MacBeth regression results show that not only have the realized jump components and the continuou...

Entrepreneurs often face undiversifiable idiosyncratic risks from their business investments. Motivated by this observation, we extend the standard real options approach to investment to an incomplete markets environment and analyze the joint decisions of business investments, consumption-saving and portfolio selection. We show that precautionary saving motive affects the investment timing deci...

Entrepreneurs face significant non-diversifiable idiosyncratic business risks. In a dynamic incomplete-markets model of entrepreneurial finance, we show that such risks have important implications for their interdependent consumption/saving, portfolio choice, financing, investment, and endogenous default/cash-out decisions. Even though more risk-averse entrepreneurs default earlier for given de...

pricing for an insurance policy can be described as the process of calculation of expectedcompensation to be paid to property losers as well as associated costs of potential risks. loss forecast isaccurate if the risks will be identified appropriately in order to calculate the frequency and expected severityof losses.this is particularly important about environmental risks since most of them ap...

We develop a dynamic incomplete-markets model of entrepreneurial firms, and demonstrate the implications of nondiversifiable risks for entrepreneurs’ interdependent consumption, portfolio allocation, financing, investment, and business exit decisions. We characterize the optimal capital structure via a generalized tradeoff model where risky debt provides significant diversification benefits. No...

The purpose of this study was to create quantitative models value ether, ether futures, and options based upon the ability cryptocurrencies transform existing intermediary-verified payments non-intermediary-based currency transfers, as a late mover displace bitcoin first mover, valuation in context investor irrationality models. risk-averse investor’s utility function is combination expectation...

We propose a new decision criterion under risk in which people extract both utility from anticipatory feelings ex ante and disutility from disappointment ex post. The decision maker chooses his degree of optimism, given that more optimism raises both the utility of ex ante feelings and the risk of disappointment ex post. We characterize the optimal beliefs and the preferences under risk generat...