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Ambiguous information, portfolio inertia, and excess volatility

I study the effects of risk and ambiguity (Knightian uncertainty) on optimal portfolios and equilibrium asset prices when investors receive information that is difficult to link to fundamentals. I show that the desire of investors to hedge ambiguity leads to portfolio inertia and excess volatility. Specifically, when news is surprising, investors may not react to price changes even if there are no transaction costs or other market frictions. Moreover, I show that small shocks to cash flow news, asset betas, or market risk premia may lead to drastic changes in the stock price and hence to excess volatility..Printed journal

Ketersediaan

Call NumberLocationAvailable
JOF6606PSB lt.dasar - Pascasarjana1
Penerbit Wiley Periodicals.,
Edisi -
Subjek Investments
Prices
Mathematical models
Securities
Risk aversion
Hedging (Finance)
Risk premiums
Stocks (finance)
Volatility (finance)
Individual investors
portfolio management (investments)
financial market reaction
risk uncertainty
ISBN/ISSN 221082
Klasifikasi -
Deskripsi Fisik -
Info Detail Spesifik -
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