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http://hdl.handle.net/10419/25189
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| Title: | | Empirical pricing kernels and investor preferences  |
| Authors: | | Detlefsen, Kai Härdle, Wolfgang Karl Moro, Rouslan A. |
| Issue Date: | | 2007 |
| Series/Report no.: | | SFB 649 discussion paper 2007,017 |
| Abstract: | | This paper analyzes empirical market utility functions and pricing kernels derived from the DAX and DAX option data for three market regimes. A consistent parametric framework of stochastic volatility is used. All empirical market utility functions show a region of risk proclivity that is reproduced by adopting the hypothesis of heterogeneous individual investors whose utility functions have a switching point between bullish and bearish attitudes. The inverse problem of finding the distribution of individual switching points is formulated in the space of stock returns by discretization as a quadratic optimization problem. The resulting distributions vary over time and correspond to different market regimes. |
| Subjects: | | Utility function pricing kernel behvioral finance , risl aversion risk proclivity Heston model |
| JEL: | | G12 G13 C50 |
| Document Type: | | Working Paper |
| Appears in Collections: | | SFB 649 Discussion Papers, HU Berlin
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