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Home | Events Archive | Beyond Arbitrage: Deviations from Risk-Return
Seminar

Beyond Arbitrage: Deviations from Risk-Return


  • Series
    Erasmus Econometric Institute Series
  • Speaker
    Benjamin Holcblat (University of Luxembourg)
  • Field
    Econometrics
  • Location
    Erasmus University Rotterdam, E building, room ET-14
    Rotterdam
  • Date and time

    May 23, 2024
    12:00 - 13:00

Abstract

Differences in expected returns reflect and guide investment decisions in the economy. Thus, one often wants to explain differences in expected return without assuming a specific model of the economy. We propose two tests to assess whether risk alone can explain differences in expected returns. We provide the tests with equilibrium foundations that hold within a large class of models. We study tests' properties mathematically and in simulations. Empirically, we find that risk cannot explain most differences in expected returns of characteristic-sorted portfolios. Our findings are consistent with a prominent role of frictions and behavioral biases.

Registration
You can sign up for this seminar by sending an email to eb-secr@ese.eur.nl. The lunch will be provided (vegetarian option included).