Do investors gain by selling the tails of return distributions?
Year: 2024
Type: article
Abstract: This paper examines whether investors gain by selling the tails of return distributions. To address this, we develop a way of ranking and scoring actively managed funds and investment strategies, which accounts for ambiguity aversion and risk aversion in decision‐making. Using data relating to options on the S&P 500 equity index and Treasury bond futures and to hedge funds, we provide evidence that suggests a negative answer to this question. We reinforce this evidence with data from options on the STOXX 50, FTSE, and Nikkei equity indices.
Source: Mathematical Finance
DOI: 10.1111/mafi.12447
Authors: Gurdip Bakshi, John Crosby, Xiaohui Gao
Institutions: Temple University, Old Dominion University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4403490842