Abstract
Investors typically think of risk as the uncertainty of wealth at the end of their investment horizon. By focusing on the dispersion of ending wealth, investors ignore the effect of interim losses, no matter how severe. Investors also measure risk as though returns come from a single regime, which may understate the likelihood and severity of interim losses.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Ang, A., and J. Chen. “Asymmetric Correlations of Equity Portfolios.” Working paper, Columbia University, 2000.
Boyer, M., B. Gibson, and M. Loretan. “Pitfalls in Test for Changes in Correlations.” International Finance Discussion Paper 597, Board of Governors of the Federal Reserve System, 1997.
Chow, G., E. Jacquier, M. Kritzman, and K. Lowry. “Optimal Portfolios in Good Times and Bad.” Financial Analysts Journal, May/June 1999.
Forbes, K., and R. Rigobon. “No Contagion, Only Interdependence: Measuring Stock Market Co-Movements.” Working paper 7267, NBER, 1999.
Hamilton, J. Time Series Analysis. Princeton: Princeton University Press, 1994.
Härdle, W. Applied Nonparametric Regression. Econometric Society Monographs No. 19. Cambridge: Cambridge University Press, 1990.
Henriksson, R., and R. C. Merton. “On Market Timing and Investment Performance: II. Statistical Procedures for Evaluating Forecasting Skills.” Journal of Business, Vol. 54, No. 4 (1981).
Johnson, N.L., and S. Kotz. Continuous Multivariate Distributions. New York: John Wiley, 1972.
Karlin, S., and H. Taylor. A First Course in Stochastic Processes, 2nd ed. New York: Academic Press, 1975.
Longin, F., and B. Solnik. “Extreme Correlations of International Equity Markets.” Forthcoming, Journal of Finance, 2001.
Merton, R. C. “On Market Timing and Investment Performance: I. An Equilibrium Theory of Value for Market Forecasts.” Journal of Business, Vol. 54, No. 3 (1981).
Odier, P., and B. Solnik. “Lessons for International Asset Allocation.” Financial Analysts Journal, March/ April 1993.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2001 Springer Science+Business Media New York
About this chapter
Cite this chapter
Kritzman, M., Lowry, K., Van Royen, AS. (2001). Risk, Regimes, and Overconfidence. In: Figlewski, S., Levich, R.M. (eds) Risk Management: The State of the Art. The New York University Salomon Center Series on Financial Markets and Institutions, vol 8. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-0791-8_11
Download citation
DOI: https://doi.org/10.1007/978-1-4615-0791-8_11
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4613-5241-9
Online ISBN: 978-1-4615-0791-8
eBook Packages: Springer Book Archive