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Colog asset pricing, evidence from emerging markets

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  • Dranev Yury

    ()
    (National Research University Higher School of Economics)

  • Fomkina Sofya

    (National Research University Higher School of Economics)

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    Abstract

    We introduce a new asset pricing model to account for risk asymmetrically in a very natural way. Assuming asymmetric investor behavior we develop a utility function similar to a quadratic utility but include a colog measure for capturing risk attitude. Asymmetry in investor preferences follows the asymmetric relationships between asset and market returns in equilibrium. Moreover the local version of the model depends on the characteristics of domestic markets, which is reflected in the different relationship between asset and market returns. We test the model in the Russian and South African markets and show that market premium in the Russian market is higher than in the South African market.

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    File URL: http://www.hse.ru/data/2014/01/23/1325656878/26FE2013.pdf
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    Bibliographic Info

    Paper provided by National Research University Higher School of Economics in its series HSE Working papers with number WP BRP 26/FE/2013.

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    Length: 11 pages
    Date of creation: 2013
    Date of revision:
    Publication status: Published in WP BRP Series: Financial Economics / FE, December 2013, pages 1-11
    Handle: RePEc:hig:wpaper:26/fe/2013

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    Keywords: asset pricing models; risk measures; asymmetric investor’s preferences; market risk premium.;

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