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Job Talk: Generalized Disappointment Aversion, Learning, and Asset Prices (Mykola Babiak, CERGE-EI)

11/04/2018

We invite all faculty members and students to a research seminar by Mykola Babiak (CERGE-EI) who is interested in a position of Assistant Professor in Finance at IES. The seminar is on Wednesday, April 18, at 5 pm in Room 601.

Topic: Generalized Disappointment Aversion, Learning, and Asset Prices

Abstract: This paper provides a generalized disappointment aversion (GDA) interpretation of the variance and skew risk premia in equity returns and the volatility skew in index option prices. The key ingredients are Bayesian learning about the consumption growth rate and the investor's tail aversion induced by GDA preferences which amplify the impact of consumption shocks. This model with disappointment risk reproduces salient properties of the variance and skew risk premia and generates a realistic volatility skew implied by index options, while simultaneously matching the mean and volatility of risk-free rate and equity returns, and the level of the price-dividend ratio.

The paper is available here.

Autor - doc. PhDr. Martin Gregor Ph.D.

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