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Systematic risk, government policy intervention, and dynamic contrarian investments

2017-1-6      点击:
 

Systematic risk, government policy intervention, and dynamic contrarian investments

【刊物】INTERNATIONAL REVIEW OF ECONOMICS & FINANCE

【出版日期】201605

【作者】  刘家鹏等;         

【机构】  中国计量经管学院

【摘要】When systematic risk is high, or the market crashes, most risk-averse investors choose to exit the market; however, there are some contrarian investors who opt to make investments. We model such contrarian behaviors by incorporating investors' expectations of government policies into the conventional risk-return trade-off framework. We show that when policy risk is low and there is a high probability that the market will recover subsequent to government intervention, the optimal solution is for investors to make investments. However, when the policy risk is high and the market has a high probability of deteriorating, the optimal investment decision is to exit. Our simulation results are consistent with the model predictions. (C) 2016 Elsevier Inc. All rights reserved.     

 

【关键词】  Contrarian investments; Policy expectations; Systematic risk; Optimal decisions    

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