We show in any economy trading options, with investors having mean-variance preferences, that there are arbitrage opportunities resulting from negative prices for out of the money call options. The theoretical implication of this inconsistency is that mean-variance analysis is vacuous. The practical implications of this inconsistency are investigated by developing an option pricing model for a ...

Power management for nodes in a sensor network is a topic of great interest due to the limited resources available on sensor devices and the need to maximize the network lifetime and delivery ratios. This problem is further compounded in Disruption Tolerant Networks (DTNs) since they are characterized with frequent partitions and intermittent connectivity, which may further suffer if the case o...

This paper addresses about an approach that suggests for stock portfolio optimization using the combination of Adaptive Neuro-Fuzzy Inference System (ANFIS) and Capital Asset Pricing Model (CAPM). Stock portfolio optimization aims to determine which of the stocks to be added to a portfolio based on the investor’s needs, changing economic and market conditions. In order to construct an efficient...

Starting from the reward-risk model for portfolio selection introduced in De Giorgi (2004), we derive the reward-risk Capital Asset Pricing Model (CAPM) analogously to the classical mean-variance CAPM. The reward-risk portfolio selection arises from an axiomatic definition of reward and risk measures based on few basic principles, including consistency with second order stochastic dominance. Wi...

The conditional CAPM and the nonlinear APT are two important extensions of the Sharpe-Lintner constant beta CAPM. Bansal, Hsieh, and Viswanathan (1993), and Ghysels (1998) suggest that the nonlinear APT is empirically more successful than the conditional CAPM. Using a flexible nonparametric version of the conditional CAPM, we get the opposite result: the conditional CAPM does a substantially be...

This article provides an empirical investigation into the validity of the production-based capital asset-pricing model (P-CAPM) in the Japanese asset markets during the period 1980-1997. Several methodologies are used to test the P-CAPM, which include the GMM test of the Euler equations, the volatility bound test, the mispricing test, and the test of the ability of stock and investment returns ...

For over 30 years academics and practitioners have been debating the merits of the CAPM. One of the characteristics of this model is that it measures risk by beta, which follows from an equilibrium in which investors display mean-variance behavior. In that framework, risk is assessed by the variance of returns, a questionable and restrictive measure of risk. The semivariance of returns is a mor...