Asset Pricing with Conditional Value at Risk Cover Image

Asset Pricing with Conditional Value at Risk
Asset Pricing with Conditional Value at Risk

Author(s): Mihály Ormos, Dusán Timotity
Subject(s): Business Economy / Management, Methodology and research technology
Published by: Masarykova univerzita
Keywords: Behavioral Finance; Asset Pricing; Prospect Theory; Anchoring; Conditional Value-at-Risk;
Summary/Abstract: We introduce a novel equilibrium asset-pricing model, which we build on the relationship between Conditional Value-at-Risk (CVaR) and the expected return. This approach of risk measure allows us to get rid of the normality condition of returns. Combining the CVaR risk measure method with our regression model, nonrealistic assumptions – such as rational and risk–averse investors, unlimited leverage opportunity and price-taker investors – of the most commonly used models can be almost entirely omitted.