Complex Asset Markets

• 成果类型: Article
• 署名作者: Eisfeldt, Andrea L. L.; Lustig, Hanno; Zhang, Lei
• 署名单位: University of California System; University of California Los Angeles; National Bureau of Economic Research; Stanford University; University of Hong Kong; University of California System; University of California Los Angeles
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13264
• 发表日期: 2023
• 页码: 2519-2562
• 关键词: HIGH-WATER MARKS; equilibrium-model; size distribution; COSTLY ARBITRAGE; capital-market; RISK; DYNAMICS; hedge; price; WEALTH

摘要

Investors' individual arbitrage models introduce idiosyncratic risk into complex asset strategies, driving up average returns and Sharpe ratios. However, despite the attractive risk-return trade-off, participation is limited. This is because effective Sharpe ratios in complex asset markets vary with investors' expertise. Investors with higher expertise, better models, and lower resulting idiosyncratic risk exposures realize higher Sharpe ratios. Their demand deters entry by less sophisticated investors. As predicted by our model, market dislocations are characterized by an increase in idiosyncratic risk, investor exit, and persistently elevated alphas and Sharpe ratios. The selection effect from higher expertise agents' more favorable Sharpe ratios is unique to our model and key to our main results.