Hot answers tagged expected-return
3
What a great question -- it touches on many issues at the core of quantitative finance. This answer might be a lot more than you bargained for, but it's too interesting to pass up.
References
Mostly, this subject falls somewhere at the intersection of these three highly-interrelated topics: risk-neutral valuation, rational pricing and the fundamental ...
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It seems that your real question is: is the PFP (Price Formation Process) diffusive from intraday to weekly sampling rate?
It is a very good question since on intraday, some academics found some multifractal features into intraday returns, meaning that the PFP is not a Geometric Brownian Motion at small scales (even considering stochastic volatility).
You ...
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This may or may not be helpful, since I don't have anything to point you to that specifically addresses the high skewness of the distribution you mention. However, this sounds like it is probably an idiosyncratic risk, and that certainly has bearing on whether or not it would be priced.
In the standard capital asset pricing model, the marginal investor ...
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