In this paper we develop a novel theory to explain why green stocks should underperform relative conventional stocks. We assume that investors derive utility from investing in – what call “warm-glow” investment. the theoretical implications of these preferences model is an extension Consumption-based Capital Asset Pricing Model. estimate using Generalized Method Moments. Our estimates strength ...

I review recent research efforts in the area of empirical cross-sectional asset pricing. I start by summarizing the evidence on cross-sectional return predictability and the failure of standard (consumption) CAPM models and their conditional versions to explain these predictability patterns. One response in part of the recent literature is to focus on adhoc factor models, which summarize the cr...

In the model of asset appreciation advanced here, the market economy and the market of asset claims on the economy are modeled as organic (or exponential growth) processes, similar to those commonly seen in nature and the biological sciences. In this model, investors have a log-wealth utility function. Within the framework, the market risk premium is derived as the premium that balances supply ...

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This paper introduces a financial hedging model for global environment risks. Our approach is based on portfolio insurance under hedging constraints. Investors are assumed to maximize their expected utilities defined on financial and environmental asset values. The optimal investment is determined for quite general utility functions and hedging constraints. In particular, our results suggest ho...

This paper examines a multiperiod production economy where investors do not observe the realizations of productivity factors or security expected returns. Unlike previous work, which expresses the equilibrium conditions as functions of unobservable (to both real-world investors and empiricists) moments of the distributions of returns, we express the equilibrium real rate as a function of the ob...

We model illiquid asset markets where institutional investors account for their priceimpact when trading. The model explains why liquidity beta’s and market prices of liquidity-risk are time varying, and elevated during periods of market turbulence and heightened trading. We extend the distressed investor literature to a setting where all investors are optimizing, rational, and aware of distres...

Futures contract is one of the most important derivatives that is used in financial markets in all over the world to buy or sell an asset or commodity in the future. Pricing of this tool depends on expected price of asset or commodity at the maturity date. According to this, theoretical futures pricing models try to find this expected price in order to use in the futures contract. So in this ar...