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Colog asset pricing, evidence from emerging markets

Author

Listed:
  • Dranev Yury

    (National Research University Higher School of Economics)

  • Fomkina Sofya

    (National Research University Higher School of Economics)

Abstract

We introduce a new asset pricing model to account for risk asymmetrically in a very natural way. Assuming asymmetric investor behavior we develop a utility function similar to a quadratic utility but include a colog measure for capturing risk attitude. Asymmetry in investor preferences follows the asymmetric relationships between asset and market returns in equilibrium. Moreover the local version of the model depends on the characteristics of domestic markets, which is reflected in the different relationship between asset and market returns. We test the model in the Russian and South African markets and show that market premium in the Russian market is higher than in the South African market.

Suggested Citation

  • Dranev Yury & Fomkina Sofya, 2013. "Colog asset pricing, evidence from emerging markets," HSE Working papers WP BRP 26/FE/2013, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:26/fe/2013
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    More about this item

    Keywords

    asset pricing models; risk measures; asymmetric investor’s preferences; market risk premium.;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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