The equity premium of interest in theoretical models is the extra return investors anticipate when purchasing risky stock instead of risk-free debt. Unfortunately, we do not observe this ex ante premium in the data; we only observe the returns that investors actually receive ex post, after they...

Market expectations of future return volatility play a crucial role in finance; so too does our understanding of the process by which information is incorporated in security prices through the trading process. This paper seeks to learn something about both of these issues by investigating...

Existing empirical research investigating the size of the equity premium has largely consisted of a series of innovations around a common theme: producing a better estimate of the equity premium by using better data or a better estimation technique. The equity premium estimate that emerges from...

A core tenet of financial economics states that, in a market populated by rational investors, the fundamental price of an asset equals the expected discounted present value of its cash flows. This implies, for example, that in a rational and efficient bubble-free market, stock price movements...

This paper develops a procedure for forecasting the distribution from which future stock prices/returns will be drawn fundamentally. Our methodology therefore provides a means for forecasting future stock prices and return volatilities and thus for fundamentally valuing assets such as stocks and...

We investigate empirically the role of trading volume (1) in predicting the relative informativeness of volatility forecasts produced by autoregressive conditional heteroskedasticity (ARCH) models versus the volatility forecasts derived from option prices, and (2) in improving volatility...