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Pricing Of Idiosyncratic Risk In An Intermediary Asset Pricing Model, Hasib Ahmed
Pricing Of Idiosyncratic Risk In An Intermediary Asset Pricing Model, Hasib Ahmed
University of New Orleans Theses and Dissertations
Standard asset pricing theories suggest that only systematic risk is priced. Empirical studies report a relationship between idiosyncratic volatility or risk (IVOL) and asset price. The most common explanation for this anomaly is that households under-diversify creating a Bad Model problem. This paper uses an Intermediary Asset Pricing Model (IAPM) as a way to control for under-diversification in evaluating the relationship between IVOL and asset price. We find that IVOL premia is lower in an IAPM. Our findings indicate that under-diversification can explain the anomaly partially.
Two Essays In Economics And Finance, Phuvadon Wuthisatian
Two Essays In Economics And Finance, Phuvadon Wuthisatian
University of New Orleans Theses and Dissertations
This dissertation contains two essays. The first essay investigates the measure of FX liquidity and determinants of the change in FX liquidity. Using 20 cross currency exchange rates over spanning period of 1999 to 2016, funding constraints and global risks are responsible for the main drivers of changing in FX liquidity. The magnitudes of both G7 and emerging volatility index are offsetting each other in all the regression models indicating that FX investors take diversification trading strategies to diversify their portfolios. The financial crisis provides an evidence that the more financial constraint issues contribute to the change in FX market …