Arbitrage pricing with estimation risk

Article Abstract:

An analysis of the arbitrage pricing theory is presented. The analysis assumes investors have no access to complete information concerning asset returns, where assets exhibit varying degrees of information availability. Thus, investors with Bayesian inclinations assign expected returns and factor betas for each asset available in the market. A linear relation is generated by these returns and factor betas.

Research, Usage, Risk assessment, Pricing, Estimation theory, Arbitrage

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Negative moments, risk aversion and stochastic dominance

Article Abstract:

Stochastic dominance is a useful theoretical and practical tool for asset ranking. However, research has failed to establish simple general conditions for stochastic dominance. A study has established that an ordering of moment-generating functions is a prerequisite of stochastic dominance.

Analysis, Economic aspects, Stochastic analysis, Financial instruments

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