Statistics of Risk Aversion

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Statistics of Risk Aversion

Author Info

Enzo Giacomini
Wolfgang Härdle

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Abstract

Information about risk preferences from investors is essential for modelling a wide range of quantitative finance applications. Valuable information related to preferences can be extracted from option prices through pricing kernels. In this paper, pricing kernels and their term structure are estimated in a time varying approach from DAX and ODAX data using dynamic semiparametric factor model (DSFM). DSFM smooths in time and space simultaneously, approximating complex dynamic structures by basis functions and a time series of loading coefficients. Contradicting standard risk aversion assumptions, the estimated pricing kernels indicate risk proclivity in certain levels of return. The analysis of the time series of loading coefficients allows a better understanding of the dynamic behaviour from investors preferences towards risk.

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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2007-025.

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Length: 11 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2007-025

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Find related papers by JEL classification:
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-05-12 (All new papers)
NEP-UPT-2007-05-12 (Utility Models & Prospect Theory)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Enzo Weber, 2007. "Who Leads Financial Markets?," SFB 649 Discussion Papers SFB649DP2007-015, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
Other versions:
- Weber, Enzo, 2007. "Who Leads Financial Markets?," MPRA Paper 5099, University Library of Munich, Germany, revised Oct 2007. [Downloadable!]
Enzo Weber, 2007. "What Happened to the Transatlantic Capital Market Relations?," SFB 649 Discussion Papers SFB649DP2007-014, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
Enzo Weber, 2007. "Regional and Outward Economic Integration in South-East Asia," SFB 649 Discussion Papers SFB649DP2007-019, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
Other versions:
- Weber, Enzo, 2007. "Regional and Outward Economic Integration in South-East Asia," MPRA Paper 6136, University Library of Munich, Germany, revised Dec 2007. [Downloadable!]
Szymon Borak & Wolfgang Härdle & Enno Mammen & Byeong U. Park, 2007. "Time Series Modelling with Semiparametric Factor Dynamics," SFB 649 Discussion Papers SFB649DP2007-023, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
Other versions:
- Park, Byeong U. & Mammen, Enno & HÃ¤rdle, Wolfgang & Borak, Szymon, 2009. "Time Series Modelling With Semiparametric Factor Dynamics," Journal of the American Statistical Association, American Statistical Association, vol. 104(485), pages 284-298. [Downloadable!] (restricted)
Dirk Bethmann & Michael Kvasnicka, 2007. "Uncertain Paternity, Mating Market Failure, and the Institution of Marriage," SFB 649 Discussion Papers SFB649DP2007-013, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
Other versions:
- Dirk Bethmann & Michael Kvasnicka, 2007. "Uncertain Paternity, Mating Market Failure, and the Institution of Marriage," Discussion Paper Series 0701, Institute of Economic Research, Korea University. [Downloadable!]
Oliver Volckart, 2007. "Rules, Discretion or Reputation? Monetary Policies and the Efficiency of Financial Markets in Germany, 14th to 16th Centuries," SFB 649 Discussion Papers SFB649DP2007-007, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Volodymyr Perederiy, 2007. "Kombinierte Liquiditäts- und Solvenzkennzahlen und ein darauf basierendes Insolvenzprognosemodell für deutsche GmbHs," SFB 649 Discussion Papers SFB649DP2007-060, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
Sebastian Braun & Juliane Scheffel, 2007. "Does International Outsourcing Depress Union Wages?," SFB 649 Discussion Papers SFB649DP2007-033, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
Marcus Wagner, 2007. "Determinants of the Acquisition of Smaller Firms by Larger Incumbents in High-Tech Industries: Are they related to Innovation and Technology Sourcing?," SFB 649 Discussion Papers SFB649DP2007-063, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]
Yuri Golubev & Wolfgang Härdle & Roman Timonfeev, 2008. "Testing Monotonicity of Pricing Kernels," SFB 649 Discussion Papers SFB649DP2008-001, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany. [Downloadable!]

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