On the efficiency of the negligence rule

The three versions of the negligence rule discussed in the literature differ regarding whether a negligent injurer is liable for the entire loss or only for the incremental loss; or regarding whether negligence is defined as failure to take at least due care or failure to take a cost‐justified precaution. It is shown in the paper that the incremental version with untaken precaution notion of negligence is not efficient; not even for the unilateral case. The paper also establishes, for the bilateral case, the efficiency of the incremental version with the shortfall‐from‐due‐care way of defining negligence.     

Multivariate risk aversion and uninsurable risks: Theory and applications

The objective of this paper is to develop conditions for global multivariate comparative risk aversion in the presence of uninsurable, or background, risks, and thus generalize Kihlstrom and Mirman [1974] and Karni [1979,1989]. We analyze von Neumann-Morgenstern (VNM) utility functionsas well as smooth preference functionals which are nonlinear in distribution but locally linear in probabilities. In each case we provide an economic application which illustrates how our theorems can be used. We analyze a risk sharing, a portfolio choice, and a labor supply problem for VNM utility functions, and the optimal allocation of effort to risky technologies in the presence of a random supply (or quality) of a public good for nonlinear preference functionals. We consider thecase where the random variables are mean-independent as well as the case where they are independent. In the labor supply application for VNM utility functions, we show that if the two risks are independent, the comparative statics effect of greater risk aversion on labor supply in the presence of a background non-wage income risk is determined by a monotonic relationship between labor supply and the wage rate under certainty. That is, we extend the applicability of the Diamond-Stiglitz [1974]-Kihlstrom-Mirman [1974]single-crossing property to the case where an independent background risk is present.     

Hedging errors with Leland's option model in the presence of transaction costs

Nonzero transaction costs invalidate the Black–Scholes [1973. Journal of Political Economy 81, 637–654] arbitrage argument based on continuous trading. Leland [1985. Journal of Finance 40, 1283–1301] developed a hedging strategy which modifies the Black–Scholes hedging strategy with a volatility adjusted by the length of the rebalance interval and the rate of the proportional transaction cost. Kabanov and Safarian [1997. Finance and Stochastics 1, 239–250] calculated the limiting hedging error of the Leland strategy and pointed out that it is nonzero for the approximate pricing of an European call option, in contradiction to Leland's claim. As a further contribution, we first identify the mathematical flaw in the argument of Leland's claim and then quantify the expected percentage of hedging losses in terms of the hedging frequency and the level of the option strike price.     

Accounting for optimism and pessimism in expected utility

We provide a preference foundation for decision under risk resulting in a model where probability weighting is linear as long as the corresponding probabilities are not extreme (i.e., 0 or 1). This way, most of the elegance and mathematical tractability of expected utility is maintained and also much of its normative foundation. Yet, the new model can accommodate the extreme sensitivity towards changes from 0 to almost impossible and from almost certain to 1 that has widely been documented in the experimental literature. The model can be viewed as “expected utility with the best and worst in mind” as suggested by Chateauneuf, Eichberger and Grant (Chateauneuf, Alain, Eichberger, Jürgen, Grant, Simon, 2007. Choice under uncertainty with the best and worst in mind: NEO-Additive capacities. Journal of Economic Theory 137, 538–567) or, following our preference foundation, interpreted as “expected utility with consistent optimism and pessimism”.     

Dynamic Factor Demands and Technology Measurement under Arbitrary Expectations

We present a dynamic model of factor demands based on expected discounted costs minimization. While making only very mild assumptions on expectations and technology, we are able to establish a duality relationship between contemporary factor demands and the technology, and we provide formula for easily recovering marginal products, returns to scale, and technological change from estimated factor demands. Parametrization and implementation are illustrated in a detailed example.     

股票回报率截面离差包含的信息

本文通过实证研究发现，股票回报率的截面离差包含单只股票和组合回报率未来波动的增量信息。而对非预期离差而言，当后期出现高的非预期离差时，伴随的回报率具有惯性，当后期出现低的非预期离差时，伴随的回报率呈现反转现象，这种结论无论对单个公司还是按平均市值分类的组合都是成立的。这些结论对事件研究、期权定价等需要预测价格波动的研究及更好理解价格信息都是有用的，特别在中国股市能更好理解庄家的动机。     

On the predictive power of the surplus consumption ratio

This paper shows that the surplus consumption ratio, specified by Campbell and Cochrane [1999. Journal of Political Economy 107, 205–251], is a good predictor of excess returns at long horizons. We also provide empirical evidence that this variable captures a component of expected returns, not explained by the proxies for the consumption to wealth ratio, cay and cdy, proposed by Lettau and Ludvigson [2001a. Journal of Finance 56, 815–849; 2001b. Journal of Political Economy 109, 1238–1286; 2005. Journal of Financial Economics 76, 583–626]. Moreover, used as a conditioning information for the Consumption based Asset Pricing Model (C)CAPM, the resulting linear model helps to explain for the variation in average returns across the Fama–French (25) portfolios sorted by size and book-to-market characteristics.     

Cross-sectional quantile regression for estimating conditional VaR of returns during periods of high volatility

Evaluating value at risk (VaR) for a firm’s returns during periods of financial turmoil is a challenging task because of the high volatility in the market. We propose estimating conditional VaR and expected shortfall (ES) for a given firm’s returns using quantile regression with cross-sectional (CSQR) data about other firms operating in the same market. An evaluation using US market data between 2000 and 2020 shows that our approach has certain advantages over a CAViaR model. Identification of low-risk firms and a reduction in computing times are additional advantages of the new method described.     

基于支付清算安排对中央银行货币政策预微调机制的实证研究

2011年11月16日,中国人民银行发布《2011年第三季度中国货币政策执行报告》(以下简称《报告》)指出,下阶段央行将继续实施稳健货币政策,同时密切监测国内外经济金融形势发展变化,把握好政策的力度和节奏,适时适度进行预调微调。那么,如何理解货币政策的预微调机制,支付清算系统作为金融市场的核心基础设施和资金汇划的主干道,是否能够通过应对流动性风险的清算安排获取预微调机制的参考信息。本文将对此进行研究分析。     

Estimation of tail‐related risk measures in the Indian stock market: An extreme value approach

The purpose of the study is to estimate tail-related risk measures using extreme value theory (EVT) in the Indian stock market. The study employs a two stage approach of conditional EVT originally proposed by McNeil and Frey (2000) to estimate dynamic Value at Risk (VaR) and expected shortfall (ES). The dynamic risk measures have been estimated for different percentiles for negative and positive returns. The estimates of risk measures computed under different quantile levels exhibit strong stability across a range of the selected thresholds, implying the accuracy and reliability of the estimated quantile based risk measures.