Colog asset pricing, evidence from emerging markets

Yury Dranev and Sofya Fomkina

HSE Working papers from National Research University Higher School of Economics

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.

Keywords: asset pricing models; risk measures; asymmetric investor’s preferences; market risk premium. (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2013
New Economics Papers: this item is included in nep-afr, nep-cis and nep-upt
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Published in WP BRP Series: Financial Economics / FE, December 2013, pages 1-11

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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:26/fe/2013

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