Speaker:
Fabio Trojani
- University of Geneva
Wednesday, February 24, 2021
at
12:00 PM
Zoom webinar: https://univr.zoom.us/j/88259321410
We propose a novel no-arbitrage framework, which exploits convex asset pricing constraints to study the properties of investors’ marginal utility of wealth or, more generally, Stochastic Discount Factors (SDFs). We establish a duality between minimum dispersion SDFs and suitable penalized portfolio selection problems, building the foundation for a nonparametric characterization of the feasible tradeoffs between SDF pricing accuracy and its comovement with systematic risks. Empirically, we find that a minimum variance correction of a CAPM–SDF produces a Pareto optimal tradeoff. This Pareto optimal SDF depends on just two economically distinct risk factors: A market factor and a minimum variance excess return factor, which optimally bounds the aggregate mispricing of risks unspanned by market risk.
- Programme Director
-
Roberto
Renò
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External reference
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- Publication date
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January 15, 2021