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Working Paper
A Robust Capital Asset Pricing Model
We build a market equilibrium theory of asset prices under Knightian uncertainty. Adopting the mean-variance decisionmaking model of Maccheroni, Marinacci, and Ruffino (2013a), we derive explicit demands for assets and formulate a robust version of the two-fund separation theorem. Upon market clearing, all investors hold ambiguous assets in the same relative proportions as the assets' market values. The resulting uncertainty-return tradeoff is a robust security market line in which the ambiguous return on an asset is measured by its beta (systematic ambiguity). A simple example on portfolio ...
Discussion Paper
Bank Complexity: Is Size Everything?
Can we measure the complexity of large banks by comparing their balance sheets?
Discussion Paper
Some Implications of Knightian Uncertainty for Finance and Regulation
With the recession of 2008, "uncertainty" became a buzzword. Since then, economists have largely shaped how policymakers, politicians, and the general public think about uncertainty, through, among other means, models that explicitly account for uncertainty.