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CAPM-like formulae and good deal absence with ambiguous setting and coherent risk measure

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dc.affiliation.institutoUC3M. Instituto para el Desarrollo de Empresas y Mercados (INDEM)es
dc.contributor.authorBalbás, Beatriz
dc.contributor.authorBalbás, Raquel
dc.contributor.editorUniversidad Carlos III de Madrid. Instituto para el Desarrollo Empresarial (INDEM)es
dc.date.accessioned2011-11-24T19:12:01Z
dc.date.available2011-11-24T19:12:01Z
dc.date.issued2011
dc.description.abstractRisk measures beyond the variance have shown theoretical advantages when addressing some classical problems of Financial Economics, at least if asymmetries and/or heavy tails are involved. Nevertheless, in portfolio selection they have provoked several caveats such as the existence of good deals in most of the arbitrage free pricing models. In other words, models such as Black and Scholes or Heston allow investors to build sequences of strategies whose expected return tends to in nite and whose risk remains bounded or tends to minus in nite. This paper studies whether this drawback still holds if the investor is facing the presence of multiple priors, as well as the properties of optimal portfolios in a good deal free ambiguous framework. With respect to the rst objective, we show that there are four possible results. If the investor uncertainty is too high he/she has no incentives to buy risky assets. As the uncertainty (set of priors) decreases the interest in risky securities increases. If her/his uncertainty becomes too low then two types of good deal may arise. Consequently, there is a very important di¤erence between the ambiguous and the non ambiguous setting. Under ambiguity the investor uncertainty may increase in such a manner that the model becomes good deal free and presents a market price of risk as close as possible to that re ected by the investor empirical evidence. Hence, ambiguity may help to overcome some meaningless ndings in asset pricing. With respect to our second objective, good deal free ambiguous models imply the existence of a benchmark generating a robust capital market line. The robust (worst-case) risk of every strategy may be divided into systemic and speci c, and no robust return is paid by the speci c robust risk. A couple of betas may be associated with every strategy, and extensions of the CAPM most important formulas will be proved.en
dc.description.sponsorshipPartially supported by "RD-Sistemas S.A", Welzia Management SGIIC SA and "MICINN" (Spain, Grant ECO2009-14457-C04)en
dc.format.mimetypeapplication/pdf
dc.identifier.issn1989-8843
dc.identifier.repecid-11-04
dc.identifier.urihttps://hdl.handle.net/10016/12636
dc.language.isoeng
dc.relation.ispartofseriesINDEM Working Paper Business Economicen
dc.relation.ispartofseries11-04
dc.relation.projectIDComunidad de Madrid. S2009/ESP-1685/RIESGOSes
dc.relation.projectIDGobierno de España. ECO2009-14457-C04
dc.rightsAtribución-NoComercial-SinDerivadas 3.0 España
dc.rights.accessRightsopen access
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.ecienciaEmpresa
dc.subject.jelG11
dc.subject.jelG12
dc.subject.otherAmbiguityen
dc.subject.otherConditional value at risken
dc.subject.otherGood dealen
dc.subject.otherCAPMen
dc.titleCAPM-like formulae and good deal absence with ambiguous setting and coherent risk measureen
dc.typeworking paper*
dspace.entity.typePublication
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