SSRN Author: Grigory VilkovGrigory Vilkov SSRN Content
http://www.ssrn.com/author=417015
http://www.ssrn.com/rss/en-usWed, 19 Feb 2014 09:07:08 GMTeditor@ssrn.com (Editor)Wed, 19 Feb 2014 09:07:08 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0New: Asset Prices in General Equilibrium with Recursive Utility and Illiquidity Induced by Transactions CostsIn this paper, we study the effect of proportional transaction costs on consumption-portfolio decisions and asset prices in a dynamic general equilibrium economy with afinancial market that has a single-period bond and two risky stocks, one of which incurs the transaction cost. Our model has multiple investors with stochastic labor income, heterogeneous beliefs, and heterogeneous Epstein-Zin-Weil utility functions. The transaction cost gives rise to endogenous variations in liquidity. We show how equilibrium in this incomplete-markets economy can be characterized and solved for in a recursive fashion. We have three main findings. One, costs for trading a stock lead to a substantial reduction in the trading volume of that stock, but have only a small effect on the trading volume of the other stock and the bond. Two, even in the presence of stochastic labor income and heterogeneous beliefs, transaction costs have only a small effect on the consumption decisions of investors, and ...
http://www.ssrn.com/abstract=2397083
http://www.ssrn.com/1282797.htmlTue, 18 Feb 2014 07:25:01 GMTREVISION: Equal or Value Weighting? Implications for Asset-Pricing TestsDoes the choice of weighting scheme used to form test portfolios influence inferences drawn from empirical tests of asset pricing? To answer this question we first show that, with monthly rebalancing, an equal-weighted portfolio outperforms a value-weighted portfolio in terms of total mean return, four-factor alpha, and Sharpe ratio. We then explain that this outperformance is partly because the equal-weighted portfolio has higher exposure to systematic risk factors; but, a considerable part (42%) of the outperformance comes from the difference in alphas, which is a consequence of the rebalancing to maintain constant weights in the equal-weighted portfolio. Finally, we demonstrate that the inferences drawn from tests of asset-pricing models are substantially different depending on whether one uses equal- or value-weighted test portfolios. We illustrate this by considering four applications: (1) a test of the CAPM, using the methodology of Gibbons, Ross, and Shanken (1989); (2) a test ...
http://www.ssrn.com/abstract=1787045
http://www.ssrn.com/1272590.htmlThu, 16 Jan 2014 07:40:36 GMTNew: Asset Prices in General Equilibrium with Recursive Utility and Illiquidity Induced by Transactions CostsIn this paper, we study the effect of proportional transaction costs on consumption-portfolio decisions and asset prices in a dynamic general equilibrium economy with a financial market that has a single-period bond and two risky stocks, one of which incurs the transaction cost. Our model has multiple investors with stochastic labor income, heterogeneous beliefs, and heterogeneous Epstein-Zin-Weil utility functions. The transaction cost gives rise to endogenous variations in liquidity. We show how equilibrium in this incomplete-markets economy can be characterized and solved for in a recursive fashion. We have three main findings. One, costs for trading a stock lead to a substantial reduction in the trading volume of that stock, but have only a small effect on the trading volume of the other stock and the bond. Two, even in the presence of stochastic labor income and heterogeneous beliefs, transaction costs have only a small effect on the consumption decisions of investors, and ...
http://www.ssrn.com/abstract=2366296
http://www.ssrn.com/1265200.htmlThu, 12 Dec 2013 13:07:46 GMTNew: Option-Implied Correlations and the Price of Correlation RiskMotivated by extensive evidence that stock-return correlations are stochastic, we analyze whether the risk of correlation changes (affecting diversification benefits) may be priced. We propose a direct and intuitive test by comparing option-implied correlations between stock returns (obtained by combining index option prices with prices of options on all index components) with realized correlations. Our parsimonious model shows that the substantial gap between average implied (39.5% for S&P500 and 46.0% for DJ30) and realized correlations (32.5% and 35.5%, respectively) is direct evidence of a large negative correlation risk premium. Empirical implementation of our model also indicates that the index variance risk premium can be attributed to the high price of correlation risk. Finally, we provide evidence that option-implied correlations have remarkable predictive power for future stock market returns, which also stays significant after controlling for a number of fundamental market ...
http://www.ssrn.com/abstract=2359380
http://www.ssrn.com/1261248.htmlTue, 26 Nov 2013 15:50:59 GMTREVISION: Asymmetric Volatility Risk: Evidence from Option MarketsUsing non-parametric methods to model the dependencies between risk-neutral distributions of the market index (S&P 500) and its expected volatility (VIX), we show how to extract the expected risk-neutral correlation between the index and its future expected volatility. Comparing the implied correlation to its realized counterpart reveals a significant risk premium priced into the index-volatility correlation, which can be interpreted as the compensation for the fear of rising volatility during and after a market crash, i.e., fear of crash continuation for a prolonged period of time. We show how the index-volatility correlation premium is related to future market returns and explain its economics.
http://www.ssrn.com/abstract=2325380
http://www.ssrn.com/1243383.htmlMon, 23 Sep 2013 15:50:52 GMTREVISION: Asymmetric Volatility Risk: Evidence from Option MarketsUsing non-parametric methods to model the dependencies between risk-neutral distributions of the market index (S&P 500) and its expected volatility (VIX), we show how to extract the expected risk-neutral correlation between the index and its future expected volatility. Comparing the implied correlation to its realized counterpart reveals a significant risk premium priced into the index-volatility correlation, which can be interpreted as the compensation for the fear of rising volatility during and after a market crash, i.e., fear of crash continuation for a prolonged period of time. We show how the index-volatility correlation premium is related to future market returns and explain its economics.
http://www.ssrn.com/abstract=2325380
http://www.ssrn.com/1242357.htmlThu, 19 Sep 2013 06:50:33 GMTREVISION: Asymmetric Volatility Risk: Evidence from Option MarketsUsing non-parametric methods to model the dependencies between risk-neutral distributions of the market index (S&P 500) and its expected volatility (VIX), we show how to extract the expected risk-neutral correlation between the index and its future expected volatility. Comparing the implied correlation to its realized counterpart reveals a significant risk premium priced into the index-volatility correlation, which can be interpreted as the compensation for the fear of rising volatility during and after a market crash, i.e., fear of crash continuation for a prolonged period of time. We show how the index-volatility correlation premium is related to future market returns and explain its economics.
http://www.ssrn.com/abstract=2325380
http://www.ssrn.com/1241128.htmlSun, 15 Sep 2013 05:22:33 GMTREVISION: Option-Implied Correlations and the Price of Correlation RiskMotivated by extensive evidence that stock-return correlations are stochastic, we analyze whether the risk of correlation changes (affecting diversification benefits) may be priced. We propose a direct and intuitive test by comparing option-implied correlations between stock returns (obtained by combining index option prices with prices of options on all index components) with realized correlations. Our parsimonious model shows that the substantial gap between average implied (39.5% for S&P500 a
http://www.ssrn.com/abstract=2166829
http://www.ssrn.com/1226995.htmlSat, 27 Jul 2013 08:26:42 GMT