scholarly journals Asset Pricing with General Transaction Costs: Theory and Numerics

2019 ◽  
Author(s):  
Lukas Gonon ◽  
Johannes Muhle-Karbe ◽  
Xiaofei Shi
Keyword(s):  
Asset Pricing ◽  
Transaction Costs

Real-Time Profitability of Published Anomalies: An Out-of-Sample Test

2013 ◽  
Vol 03 (03n04) ◽  
pp. 1350016 ◽  
Author(s):  
Jing-Zhi Huang ◽  
Zhijian Huang
Keyword(s):  
Asset Pricing ◽  
Transaction Costs ◽  
Real Time ◽  
Empirical Evidence ◽  
Equity Market ◽  
Data Snooping ◽  
Asset Pricing Anomalies ◽  
Pricing Anomalies ◽  
Out Of Sample ◽  
Sample Test

Empirical evidence on the out-of-sample performance of asset-pricing anomalies is mixed so far and arguably is often subject to data-snooping bias. This paper proposes a method that can significantly reduce this bias. Specifically, we consider a long-only strategy that involves only published anomalies and non-forward-looking filters and that each year recursively picks the best past-performer among such anomalies over a given training period. We find that this strategy can outperform the equity market even after transaction costs. Overall, our results suggest that published anomalies persist even after controlling for data-snooping bias.

scholarly journals The Fundamental Theorem of Asset Pricing Under Transaction Costs

2011 ◽  
Author(s):  
Paolo Guasoni ◽  
Emmanuel Lepinette-Denis ◽  
Miklos Rasonyi
Keyword(s):  
Asset Pricing ◽  
Transaction Costs ◽  
Fundamental Theorem

scholarly journals Equilibrium Asset Pricing with Transaction Costs

2019 ◽  
Author(s):  
Martin Herdegen ◽  
Johannes Muhle-Karbe ◽  
Dylan Possamaï
Keyword(s):  
Asset Pricing ◽  
Transaction Costs ◽  
Equilibrium Asset Pricing

The fundamental theorem of asset pricing for continuous processes under small transaction costs

2008 ◽  
Vol 6 (2) ◽  
pp. 157-191 ◽  
Author(s):  
Paolo Guasoni ◽  
Miklós Rásonyi ◽  
Walter Schachermayer
Keyword(s):  
Asset Pricing ◽  
Transaction Costs ◽  
Fundamental Theorem ◽  
Continuous Processes

scholarly journals Dynamic Arbitrage-Free Asset Pricing with Proportional Transaction Costs

2002 ◽  
Vol 12 (1) ◽  
pp. 89-97 ◽  
Author(s):  
SHUNMING ZHANG ◽  
CHUNLEI XU ◽  
XIAOTIE DENG
Keyword(s):  
Asset Pricing ◽  
Transaction Costs ◽  
Proportional Transaction Costs

Asset Pricing and Hedging in Financial Markets with Transaction Costs: An Approach Based on the Von Neumann–Gale Model

2006 ◽  
Vol 2 (4) ◽  
pp. 327-355 ◽  
Author(s):  
M. A. H. Dempster ◽  
I. V. Evstigneev ◽  
M. I. Taksar
Keyword(s):  
Asset Pricing ◽  
Financial Markets ◽  
Transaction Costs ◽  
Von Neumann

MARKET EQUILIBRIUM WITH CAPITAL LOSS DEDUCTION OPTIONS

2001 ◽  
Vol 04 (05) ◽  
pp. 783-803 ◽  
Author(s):  
AUSTIN MURPHY
Keyword(s):  
Theoretical Model ◽  
Asset Pricing ◽  
Transaction Costs ◽  
Market Equilibrium ◽  
Expected Return ◽  
Asset Pricing Anomalies ◽  
Pricing Anomalies ◽  
Tax Loss ◽  
Tax Deduction

This research builds on a widely-cited study to prove that the permissible tax loss deduction subsidizes investments in volatile securities by materially lowering the required expected return on more volatile assets. The implications of the theory are robust to the existence of transaction costs, dividends, forced liquidations, and a ceiling on capital loss deductions in some countries. It is further shown that special tax treatment at death significantly increases the value of the tax deduction option. The theoretical model is explained to be consistent with empirical findings reported in the literature and to actually help explain some asset pricing anomalies.

scholarly journals IMPLICIT TRANSACTION COSTS AND THE FUNDAMENTAL THEOREMS OF ASSET PRICING

2017 ◽  
Vol 20 (04) ◽  
pp. 1750024 ◽  
Author(s):  
ERINDI ALLAJ
Keyword(s):  
Asset Pricing ◽  
Transaction Costs ◽  
Price Impact ◽  
Quadratic Variation ◽  
Trading Strategies ◽  
Arbitrage Pricing Theory ◽  
Bid Ask Spread ◽  
Bid Price ◽  
Equivalent Probability Measure ◽  
Implicit Transaction Costs

This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded volume. The investors in the market always buy at the ask and sell at the bid price. Implicit transaction costs are composed of two terms, one is able to capture the bid-ask spread, and the second the price impact. Moreover, a new definition of a self-financing portfolio is obtained. The self-financing condition suggests that continuous trading is possible, but is restricted to predictable trading strategies having cádlág (right-continuous with left limits) and cáglád (left-continuous with right limits) paths of bounded quadratic variation and of finitely many jumps. That is, cádlág and cáglád predictable trading strategies of infinite variation, with finitely many jumps and of finite quadratic variation are allowed in our setting. Restricting ourselves to cáglád predictable trading strategies, we show that the existence of an equivalent probability measure is equivalent to the absence of arbitrage opportunities, so that the first fundamental theorem of asset pricing (FFTAP) holds. It is also shown that the use of continuous and bounded variation trading strategies can improve the efficiency of hedging in a market with implicit transaction costs. To better understand how to apply the theory proposed we provide an example of an implicit transaction cost economy that is linear and nonlinear in the order size.

Heterogeneous time varying transaction costs and asset pricing in international equity markets

2009 ◽  
Vol 23 (3) ◽  
pp. 271-283 ◽  
Author(s):  
Andros Gregoriou ◽  
Christos Ioannidis ◽  
Sugata Ghosh
Keyword(s):  
Asset Pricing ◽  
Transaction Costs ◽  
Equity Markets ◽  
Time Varying ◽  
International Equity Markets ◽  
International Equity
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