The pricing kernel puzzle: A behavioral explanation

We show that if sophisticated institutional managers and individual investors perceive tail-risks differently, then a new explanation for the pricing kernel puzzle emerges. We show, by example, that even a tiny difference in tail-risk perception by the two investor types can explain the pricing kern...

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Bibliographic Details
Main Authors: Hammad Siddiqi, John Quiggin
Format: Article
Language:English
Published: Taylor & Francis Group 2019-01-01
Series:Cogent Economics & Finance
Subjects:
Online Access:http://dx.doi.org/10.1080/23322039.2019.1684609
Description
Summary:We show that if sophisticated institutional managers and individual investors perceive tail-risks differently, then a new explanation for the pricing kernel puzzle emerges. We show, by example, that even a tiny difference in tail-risk perception by the two investor types can explain the pricing kernel puzzle.
ISSN:2332-2039