Practitioners in finance have been trying to either maximize their fortunes or minimize any unlucky outcomes;say, Beat the market. The uncertainty is always something to fear or to overcome in financial market in order to beat the market. The price of assets seems unpredictable in a short-time interval, though academics consider market price would stay at equilibrium in the long-run, as reflecting fundamentals in the end. As “Efficiency of Financial Market” says; price of assets reveals all relevant information. The continuous-time random walk is successfully taken as close as tracking down the asset price movements. Moreover, a regime-switching between good versus bad state abruptly occurs over the business cycle (or the financial cycle). Hence, two key theoretical devices used to model risk in finance are first, to acknowledge that we see the movements of asset price micmic a random walk in a continuous manner and second, to acknowledge that we observe the state of a world seems to switch from one to another regime. In this thesis, I investigate how time variation in risks and uncertainty affects firm’s funding decisions as well as market’s aggregates movements.
|Place of Publication||Frederiksberg|
|Publisher||Copenhagen Business School [Phd]|
|Number of pages||126|
|Publication status||Published - 2016|