Asset pricing with incomplete information and fat tails

On the stability of the constant relative risk aversion (CRRA) utility under high degrees of uncertainty

“…It is worth mentioning that recent contributions in the area of asset pricing have circumvented the problems with Bayesian learning highlighted by Geweke in different ways. Bidarkota et al (2009) use a subfamily of α-stable distributions (the ones with maximal negative skewness of −1) to provide an operational theory under uncertainty for that particular case. Bakshi and Skoulakis (2010) develop the model of Weitzman (2007) further, and obtain a model that (with subjective expectations) yields a well-defined expected utility and a finite moment-generating function of the predictive distribution of consumption growth.…”

On the stability of the constant relative risk aversion (CRRA) utility under high degrees of uncertainty

“…It is worth mentioning that recent contributions in the area of asset pricing have circumvented the problems with Bayesian learning highlighted by Geweke in different ways. Bidarkota et al (2009) use a subfamily of α-stable distributions (the ones with maximal negative skewness of −1) to provide an operational theory under uncertainty for that particular case. Bakshi and Skoulakis (2010) develop the model of Weitzman (2007) further, and obtain a model that (with subjective expectations) yields a well-defined expected utility and a finite moment-generating function of the predictive distribution of consumption growth.…”

A state space framework for the residual income valuation model of stock prices

“…Second, it may be empirically desirable to examine jump-diffusion processes for abnormal earnings, given the non-Gaussian nature of the data. However, a state space framework with non-Gaussian errors invites non-Gaussian filtering, for which Kalman filter is not optimal (see Bidarkota et al 2009). Lastly, one can consider extracting the latent 'other information' variable using either a…”

On Minimax Robust Estimation Problem for Stochastic Sequences with Harmonizable Symmetric α-Stable Increments

“…Taking into account (6), obtain the following relations for the increment sequences ξ (n) (m, µ) and…”

On the stability of the constant relative risk aversion (CRRA) utility under high degrees of uncertainty

“…It is worth mentioning that recent contributions in the area of asset pricing have circumvented the problems with Bayesian learning highlighted by Geweke in different ways. Bidarkota et al (2009) use a subfamily of α-stable distributions (the ones with maximal negative skewness of −1) to provide an operational theory under uncertainty for that particular case. Bakshi and Skoulakis (2010) develop the model of Weitzman (2007) further, and obtain a model that (with subjective expectations) yields a well-defined expected utility and a finite moment-generating function of the predictive distribution of consumption growth.…”

A state space framework for the residual income valuation model of stock prices

“…Second, it may be empirically desirable to examine jump-diffusion processes for abnormal earnings, given the non-Gaussian nature of the data. However, a state space framework with non-Gaussian errors invites non-Gaussian filtering, for which Kalman filter is not optimal (see Bidarkota et al 2009). Lastly, one can consider extracting the latent 'other information' variable using either a…”

On Minimax Robust Estimation Problem for Stochastic Sequences with Harmonizable Symmetric α-Stable Increments

“…Taking into account (6), obtain the following relations for the increment sequences ξ (n) (m, µ) and…”

On the stability of the constant relative risk aversion (CRRA) utility under high degrees of uncertainty

“…It is worth mentioning that recent contributions in the area of asset pricing have circumvented the problems with Bayesian learning highlighted by Geweke in different ways. Bidarkota et al (2009) use a subfamily of α-stable distributions (the ones with maximal negative skewness of −1) to provide an operational theory under uncertainty for that particular case. Bakshi and Skoulakis (2010) develop the model of Weitzman (2007) further, and obtain a model that (with subjective expectations) yields a well-defined expected utility and a finite moment-generating function of the predictive distribution of consumption growth.…”

A state space framework for the residual income valuation model of stock prices

“…Second, it may be empirically desirable to examine jump-diffusion processes for abnormal earnings, given the non-Gaussian nature of the data. However, a state space framework with non-Gaussian errors invites non-Gaussian filtering, for which Kalman filter is not optimal (see Bidarkota et al 2009). Lastly, one can consider extracting the latent 'other information' variable using either a…”

On Minimax Robust Estimation Problem for Stochastic Sequences with Harmonizable Symmetric α-Stable Increments

“…Taking into account (6), obtain the following relations for the increment sequences ξ (n) (m, µ) and…”