Investors' individual arbitrage models introduce idiosyncratic risk into complex asset strategies, driving up average returns and Sharpe ratios. However, despite the attractive risk-return trade-off, participation is limited. This is because effective Sharpe ratios in complex asset markets vary with investors' expertise. Investors with higher expertise, better models, and lower resulting idiosyncratic risk exposures realize higher Sharpe ratios. Their demand deters entry by less sophisticated investors. As predicted by our model, market dislocations are characterized by an increase in idiosyncratic risk, investor exit, and persistently elevated alphas and Sharpe ratios. The selection effect from higher expertise agents' more favorable Sharpe ratios is unique to our model and key to our main results.

中文翻译：

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复杂的资产市场

投资者的个人套利模型将特殊风险引入复杂的资产策略中，推高了平均回报率和夏普比率。然而，尽管风险回报权衡颇具吸引力，但参与度却有限。这是因为复杂资产市场中的有效夏普比率随投资者的专业知识而变化。拥有更高专业知识、更好模型和更低的特殊风险敞口的投资者可以实现更高的夏普比率。他们的需求阻止了不太成熟的投资者进入。正如我们的模型预测的那样，市场混乱的特点是特殊风险增加、投资者退出以及阿尔法和夏普比率持续升高。较高专业知识的代理人更有利的夏普比率的选择效应是我们的模型所独有的，也是我们主要结果的关键。