Can cooperative game theory solve the low‐risk puzzle?

Benjamin R. Auer and Tobias Hiller

International Journal of Finance & Economics, 2019, vol. 24, issue 2, 884-889

Abstract: In this article, we illustrate that cooperative game theory may have the potential to solve the low‐risk puzzle, which has become one of the most important in modern finance because its implication of a negative risk‐return trade‐off poses a challenge to traditional models of asset prices. Using several simulation settings, we highlight that quantifying risk by means of assets' Shapley values, that is, assets' contributions to overall portfolio risk, instead of classic measures supplies a (more) positive risk‐return relationship in many practically relevant cases. This is partially attributable to the fact that the game‐theoretic risk measure captures more investment‐relevant information than commonly used alternatives.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1002/ijfe.1696

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:ijfiec:v:24:y:2019:i:2:p:884-889

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().