The Private Information Price of Risk
The Private Information Price of Risk (PIPR) represents the incremental price of risk assessed when private information becomes available. The PIPR plays a prominent role in models with private information. It determines the perception of risk for the recipient of a private information signal. It lies at the heart of the optimal consumption-portfolio policies of such an informed agent. It drives the return performance of an informed fund manager. It is an essential component of the welfare gains derived by investors in professionally managed funds.
KeywordsStock Price Private Information Mutual Fund Hedge Fund Excess Return
Unable to display preview. Download preview PDF.
- Chen, Y., 2007, “Timing Ability in the Focus Market of Hedge Funds,” Journal of Investment Management 5, 66–98.Google Scholar
- Detemple, J., M. Rindisbacher and T. Truong, 2014, “Dynamic Noisy Rational Expectations Equilibria with Anticipative Information,” Working Paper, Boston University.Google Scholar
- Grossman, S.J., and J.E. Stiglitz, 1980, “On the Impossibility of Informationally Efficient Markets,” American Economic Review 70, 393–408.Google Scholar
- Jacod, J., “Grossissement Initial, Hypothèse (H) et Théorème de Girsanov,” in T. Jeulin and M. Yor (Eds.), Grossissements de Filtrations: Exemples et Applications, Lecture Notes in Mathematics 1118, Springer, Berlin, 1985.Google Scholar
- Jeulin, T., “Semi-Martingales et Grossissement de Filtration,” Lecture Notes in Mathematics 833, Springer, Berlin, 1980.Google Scholar
- Rindisbacher, M., 1999, “Insider Information, Arbitrage, and Optimal Consumption and Investment Policies,” Working Paper, Universite´ de Montre´al.Google Scholar
- Treynor, J., and K. Mazuy, 1966, “Can Mutual Funds Outguess the Market?” Harvard Business Review 44, 131–136.Google Scholar