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D1: Asset Pricing Theoretical 2
Time:
Saturday, 20/Sept/2025:
9:00am - 10:30am
Session Chair: Julian Thimme
Location: Building 3, Room 2 EG
Presentations
9:00am - 9:30am Tracing the learning curve: On cryptocurrency prices, volatility, and eventual adoption
Michael Wulfsohn
University of Oxford, United Kingdom
Discussant: Julian Thimme (Karlsruher Institut für Technologie)
Major cryptocurrencies exhibit long-term declines in price growth rates and variance. This paper replicates these trends by appealing to the vast uncertainty about cryptocurrencies' eventual adoption demand, and a gradual learning process that reduces the uncertainty. In the model presented, the uncertainty leads to a discounted cryptocurrency price. However, investors receive a stream of noisy signals indicating the likely extent of eventual adoption, which reduces the discount over time. The model can forecast expected price growth and variance conditional on low interim adoption. The model also estimates the probability distribution of a cryptocurrency's extent of eventual adoption.
9:30am - 10:00am Three reasons to price carbon under uncertainty: Accuracy of simple rules
Ton van den Bremer1 , Christoph Hambel 2 , Frederick van der Ploeg3
1 Tilburg University, The Netherlands; 2 University of Oxford, United Kingdom; 3 University of Amsterdam, The Netherlands
Discussant: Michael Wulfsohn (University of Oxford)
An easy-to-interpret rule for the optimal risk-adjusted social cost of carbon is derived using perturbation analysis. This rule internalises the adverse effects of global warming on the risk of recurring climate-related disasters and the risk of irreversible climate tipping points as well as the usual adverse effect on total factor productivity. It approximates the true numerical optimum well, especially if the small parameters (i.e., the share of damages in GDP, the sensitivity of the risk of disasters to temperature and the risk of climate tipping) are small enough and the discount rates corrected for growth
and risk is not too small. The rule is also accurate if applied to models with a different supply side.
10:00am - 10:30am Understanding asset pricing factors
Viktoria Klaus, Julian Thimme
Karlsruher Institut für Technologie, Germany
Discussant: Christoph Hambel (Tilburg University)
This paper explores the economic drivers behind the widely used asset pricing factors SMB, HML, RMW, and CMA, suggested by Fama and French. While effective in practice, the fundamental economic origins of these factors remain vastly unclear. We analyze days with large factor returns and classify them using news articles from the following day. We find that HML is linked to macroeconomic news, while CMA is tied to news about commodities. SMB correlates with exchange rate news and a sentiment-driven factor, while RMW is influenced by firm-specific news. Our findings suggest that both risk-based and behavioral channels are at play, contributing to the debate on whether factor risk premiums are driven by rational explanations or mispricing.
