Anxiety in the face of risk

Eisenbach, Thomas M.; Schmalz, Martin C.

doi:10.1016/j.jfineco.2015.10.002

Cited by 72 publications

(8 citation statements)

References 64 publications

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“…on the dividend strips more generally. We note, however, that other forces such as horizon-dependent risk aversion (Eisenbach and Schmalz (2016), Lazarus (2022)) or institutional features (Belo, Collin-Dufresne, and Goldstein (2015)) may also play a role.…”

Section: A Duration-driven Returns Through Consumption Riskmentioning

confidence: 82%

“…In conclusion, the evidence in Figure 8 is consistent with consumption risk and discount rate risk playing a role in the alpha on our duration factor and on the dividend strips more generally. We note, however, that other forces such as horizon‐dependent risk aversion (Eisenbach and Schmalz (2016), Lazarus (2022)) or institutional features (Belo, Collin‐Dufresne, and Goldstein (2015)) may also play a role.…”

Section: Economic Mechanismsmentioning

confidence: 90%

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Duration‐Driven Returns

Gormsen

Lazarus²

2023

The Journal of Finance

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We propose a duration-based explanation for the premia on major equity factors, including value, profitability, investment, low-risk, and payout factors. These factors invest in firms that earn most of their cash flows in the near future and could therefore be driven by a premium on near-future cash flows. We test this hypothesis using a novel data set of single-stock dividend futures, which are claims on dividends of individual firms. Consistent with our hypothesis, the expected Capital Asset Pricing Model alpha on individual cash flows decreases in maturity within a firm, and the alpha is not related to the above characteristics when controlling for maturity.IN THIS PAPER, WE PROVIDE a simple framework for understanding the major equity risk factors in asset pricing. We focus our analysis on value, profit, investment, low-risk, and payout factors. These five categories of risk factors have a large impact on stock prices given their high persistence, and they form the basis of leading factor models such as the Fama and French models. 1 Yet, the economics behind these factors are not well understood because the factors are hard to relate to common economic fundamentals. We relate the risk factors back to economic fundamentals, and identify the source of their high

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Section: A Duration-driven Returns Through Consumption Riskmentioning

confidence: 82%

Section: Economic Mechanismsmentioning

confidence: 90%

Duration‐Driven Returns

Gormsen

Lazarus²

2023

The Journal of Finance

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“…To deliver a microeconomic foundation for a term structure for SR, we present a Lucas [55]-type economy. As in Duffie and Skiadas [33], we develop a utility gradient approach. Instead of focusing on hyperbolic discounting, as a typical source of time inconsistency (see Krusell and Smith [51] for such an approach) we consider the agent's belief formation across time, yielding an equilibrium expectation that is consistent with a maturity dependent SR.…”

Section: Introductionmentioning

confidence: 99%

“…The thesis follows with and and by taking into account. It remains to show that the conditional formulation solves the linear BSVIE (33). This can be achieved by proceeding as previously (see section 2) by means of the SR.…”

mentioning

confidence: 95%

The term structure of sharpe ratios and arbitrage-free asset pricing in continuous time

Beißner¹,

Gianin²

2021

PUQR

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Motivated by financial and empirical arguments and in order to introduce a more flexible methodology of pricing, we provide a new approach to asset pricing based on Backward Volterra equations. The approach relies on an arbitrage-free and incomplete market setting in continuous time by choosing nonunique pricing measures depending either on the time of evaluation or on the maturity of payoffs. We show that in the latter case the dynamics can be captured by a time-delayed backward stochastic Volterra integral equation here introduced which, to the best of our knowledge, has not yet been studied. We then prove an existence and uniqueness result for time-delayed backward stochastic Volterra integral equations. Finally, we present a Lucas-type consumption-based asset pricing model that justifies the emergence of stochastic discount factors matching the term structure of Sharpe ratios.

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“…In the same vein, Brandt and Wang (2003) develop a consumption-based asset pricing model in which aggregate risk aversion responses to both consumption growth and inflation news. Eisenbach and Schmalz (2016) consider “anxious” investors, who are more risk averse to an imminent risk than to distant one and propose a theory that leads to a downward-sloping term structure of risk premia. In the same vein, Andries et al (2018) propose a horizon-dependent risk aversion model involving term structures of risk premium consistent with the evidence that agents are more reluctant to immediate risks than to deferred risks.…”

Section: Introductionmentioning

confidence: 99%

Assessing Risk Aversion From the Investor’s Point of View

Díaz

Esparcia

2019

Front. Psychol.

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Throughout the financial literature, there is a great deal of debate about the nature of investors’ risk preferences. In an ever-changing world, the main schools of knowledge discuss the constant or dynamic basis of these preferences. Based on an exhaustive review of the subject of risk aversion, this paper contributes to filling the gap that exists in the literature on the risk aversion parameter that best fits the investors’ behavior toward risk. The main determinants of risk attitude are examined and the different and most novel methodologies and perspectives are carefully analyzed.

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Anxiety in the face of risk

Cited by 72 publications

References 64 publications

Duration‐Driven Returns

Duration‐Driven Returns

The term structure of sharpe ratios and arbitrage-free asset pricing in continuous time

Assessing Risk Aversion From the Investor’s Point of View

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