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    Expectile CAPM

    Access Status
    Fulltext not available
    Authors
    Hu, Wei
    Zheng, Z.
    Date
    2019
    Type
    Journal Article
    
    Metadata
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    Citation
    Hu, W. and Zheng, Z. 2019. Expectile CAPM. Economic Modelling.
    Source Title
    Economic Modelling
    DOI
    10.1016/j.econmod.2019.09.049
    ISSN
    0264-9993
    Faculty
    Faculty of Business and Law
    School
    School of Economics, Finance and Property
    URI
    http://hdl.handle.net/20.500.11937/76965
    Collection
    • Curtin Research Publications
    Abstract

    © 2019 Elsevier B.V. Conventional wisdom suggests that the uncertainty of uninformed noise-traders’ sentiment deters rational traders’ arbitrage activities. However, nowadays, social media have made the public sentiment highly predictable, whereas the CAPM-motivated beta-return relation still does not hold in practice. This study advances an argument that the sentiment can also be brought about by rational, sophisticated investors’ use of psychological insight; resultantly, the arbitrage activities are demotivated by their own sentiment, rather than deterred by noise-traders’ sentiment risk. The proposed expectile CAPM provides a parsimonious way to account for this claim, and leads to a sentiment-based functional form of pricing kernel.

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