Mean-Preserving-Spread Risk Aversion and The CAPM

This paper establishes conditions under which the classical CAPM holds in equilibrium. Our derivation uses simple arguments to clarify and extend results available in the literature. We show that if agents are risk averse in the sense of mean-preserving-spread (MPS) the CAPM will necessarily hold, along with two-fund separation. We derive this result without imposing any distributional assumptions on asset returns. The CAPM holds even when the market contains an infinite number of securities and when investors only hold finite portfolios. Our paper complements the results of Duffie(1988) who provided an derivation of the CAPM under some somewhat more technical assumptions. In addition we use simple arguments to prove the existence of equilibrium with MPS-risk-averse investors without assuming that the market is complete. Our proof does not require any additional restrictions on the asset returns, except that the co-variance matrix for the returns on the risky securities is non-singular

Age matters

This paper starts from examining the performance of equally weighted 1/N stock portfolios over time. During the last four decades these portfolios outperformed the market. The construction of these portfolios implies that their constituent stocks are in general older than those in the market as a whole. We show that the differential performance can be explained by the relation between stock returns and firm age. We document a significant relation between age and returns. Since 1977 stock returns have been an increasing function of age apart from the oldest ages. For this period the age effect completely dominates the size effect

Age matters

This paper starts from examining the performance of equally weighted 1/N stock portfolios over time. During the last four decades these portfolios outperformed the market. The construction of these portfolios implies that their constituent stocks are in general older than those in the market as a whole. We show that the differential performance can be explained by the relation between stock returns and firm age. We document a significant relation between age and returns. Since 1977 stock returns have been an increasing function of age apart from the oldest ages. For this period the age effect completely dominates the size effect

Temporal Price Relation between Stock and Option Markets and A Bias of Implied Volatility in Option Price

We show that if a particular temporal relation exists between the option and spot markets, the implied volatility in option prices can be biased depending on the level of the true volatility. The higher the true volatility, the more upward (downward) biased the implied volatility will be, if the option market leads (lags) the spot market. Using intraday data of the S&P 500 index options, we show that the option market leads the spot market at least in the sample. More importantly, the implied volatility is biased due to the lead-lag relationship, and the bias is more profound when the market is more volatile.published or submitted for publicationnot peer reviewe

An algorithm for computing options on the maximum or minimum of several assets / 1535

Includes bibliographical references (p. 17)

Fertility trends, excess mortality and the Great Irish Famine

The binding of this item renders some marginal text unreadable. A hard copy is available in UCD Library at GEN 330.08 IR/UNI2014-09-18 JG: Record reinstated from backup after damaged text_valu