Range-based Volatility Timing

in Journal of Portfolio Management (2024)

Corporate Managers, Price Noise and the Investment Factor

in Financial Innovation (2022), 8(61),

Climate Risk and Price Jumps

Scientific Conference (2022, October)

Climate Risk and Price Jumps

Scientific Conference (2022, June 13)

Is Risk-Neutral Skewness an Indicator of Downside Risk? Evidence from Tail Risk-Taking of Hedge Funds

in Journal of Derivatives (2022), 29(3), 30-45

Gender Differences and Extreme Events

Scientific Conference (2021, December)

Gender Differences and Extreme Events

Scientific Conference (2021, December)

Climate Risk and Price Jumps

Scientific Conference (2021, September)

Is This Time Really Different? Flight-to-Safety and the COVID-19 Crisis

in PLoS ONE (2021), 16(5),

A Note on Stein’s Overreaction Puzzle

in Decisions in Economics and Finance (2020), 43(1), 269-276

Recently, Christoffersen et al. (2013) argue that the overreaction puzzle of Stein (1989) can be explained by a variance-dependent pricing kernel. In this note, we challenge this view. Our theoretical ... [more ▼]

Recently, Christoffersen et al. (2013) argue that the overreaction puzzle of Stein (1989) can be explained by a variance-dependent pricing kernel. In this note, we challenge this view. Our theoretical results are in line with their argument that the variance under risk-neutral measure is more persistent than the variance under physical measure due to a negative variance risk premium. But our results do not support their argument that the more persistent variance is able to qualitatively explain Stein’s findings. We show theoretically that the persistence of the volatility cannot amplify the movements of long-term variance to short-term fluctuations in variance, and, therefore, conclude that Stein’s overreaction puzzle is still unsolved. [less ▲]