A concave security market line

Name: A concave security market line
Author: De Giorgi, E. G., Post, T., Yalçın, Atakan

İsim	A concave security market line
Yazar	De Giorgi, E. G., Post, T., Yalçın, Atakan
Basım Tarihi:	2019-09
Basım Yeri	- Elsevier
Konu	Capital market equilibrium, Asset pricing, Investment restrictions, Portfolio theory, Market beta, Stock selection
Tür	Süreli Yayın
Dil	İngilizce
Dijital	Evet
Yazma	Hayır
Kütüphane:	Özyeğin Üniversitesi
Demirbaş Numarası	0378-4266
Kayıt Numarası	9e345a24-cdaf-4b9e-9709-02d62e41c8df
Lokasyon	International Finance
Tarih	2019-09
Örnek Metin	We provide theoretical and empirical arguments in favor of a diminishing marginal premium for market risk. In capital market equilibrium with binding portfolio restrictions, investors with different risk aversion levels generally hold different sets of risky securities. Whereas the traditional linear relation breaks down, equilibrium can be described or approximated by a concave relation between expected return and market beta, and a concave relationship between market alpha and market beta. An empirical analysis of U.S. stock market data confirms the existence of a significant concave cross-sectional relation between average return and estimated market beta. We estimate that the market risk premium is at least four to six percent per annum, substantially above traditional estimates. A practical implication for active portfolio managers is that the alpha of "betting against beta" strategies seems dominated by the medium-minushigh-beta spread rather than the low-minus-medium-beta spread. The success of such strategies thus largely depends on underweighting or short selling high-beta stocks.
DOI	10.1016/j.jbankfin.2019.05.010
Cilt	106

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A concave security market line

Yazar De Giorgi, E. G., Post, T., Yalçın, Atakan

Basım Tarihi 2019-09

Basım Yeri - Elsevier

Konu Capital market equilibrium, Asset pricing, Investment restrictions, Portfolio theory, Market beta, Stock selection

Tür Süreli Yayın

Dil İngilizce

Dijital Evet

Yazma Hayır

Kütüphane Özyeğin Üniversitesi

Demirbaş Numarası 0378-4266

Kayıt Numarası 9e345a24-cdaf-4b9e-9709-02d62e41c8df

Lokasyon International Finance

Tarih 2019-09

Örnek Metin We provide theoretical and empirical arguments in favor of a diminishing marginal premium for market risk. In capital market equilibrium with binding portfolio restrictions, investors with different risk aversion levels generally hold different sets of risky securities. Whereas the traditional linear relation breaks down, equilibrium can be described or approximated by a concave relation between expected return and market beta, and a concave relationship between market alpha and market beta. An empirical analysis of U.S. stock market data confirms the existence of a significant concave cross-sectional relation between average return and estimated market beta. We estimate that the market risk premium is at least four to six percent per annum, substantially above traditional estimates. A practical implication for active portfolio managers is that the alpha of "betting against beta" strategies seems dominated by the medium-minushigh-beta spread rather than the low-minus-medium-beta spread. The success of such strategies thus largely depends on underweighting or short selling high-beta stocks.

DOI 10.1016/j.jbankfin.2019.05.010

Cilt 106