The pricing kernel puzzle: A behavioral explanation

Hammad Siddiqi and John Quiggin

Cogent Economics & Finance, 2019, vol. 7, issue 1, 1684609

Abstract: 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.

Date: 2019
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DOI: 10.1080/23322039.2019.1684609

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