To question the statistical significance of return predictability, we cannot specify a null that simply turns off that predictability, leaving dividend growth predictability at its essentially zero sample value. If neither returns nor dividend growth are predictable, then the dividend-price...

If stocks go up, investors may want to rebalance their portfolios. But investors cannot all rebalance. Expected returns may need to change so that the average investor is still happy to hold the market portfolio despite its changed composition. In this way, simple market clearing can give rise...

This paper studies time variation in expected excess bond returns. We run regressions of annual excess returns on forward rates. We find that a single factor predicts 1-year excess returns on 1-5 year maturity bonds with an R2 up to 43%. The single factor is a tent-shaped linear function of...

This paper measures the mean, standard deviation, alpha and beta of venture capital investments, using a maximum likelihood estimate that corrects for selection bias. Since firms go public when they have achieved a good return, estimates that do not correct for selection bias are optimistic. The...

Will the stock market provide high returns in the future as it has in the past? The average US stock return in the postwar period has been about 8% above treasury bill rates. But that average is poorly measured: The standard confidence interval extends from 3% to 13%. Furthermore, expected...

This paper tests a factor pricing model for stock returns. The factors are returns on physical investment, inferred from investment data via a production function. The tests examine the model's ability to explain the variation in expected returns across assets and over time. The model is not...

The investment return is defined as the real return that results from marginally increasing investment at date r, and then reaping the extra output and decreasing investment at date t+1 to leave the production plan for other dates unchanged. This paper constructs investment returns from...

This paper presents a bound on the variance of the price-dividend ratio and a decomposition of the variance of the price-dividend ratio into components that reflect variation in expected future discount rates and variation in expected future dividend growth. Unobserved discount rates needed to...

Over the past 20 years, there has been a dramatic increase in the share of executive compensation paid through stock options. In this paper, we examine the extent to which tax policy has influenced the composition of executive compensation, and discuss the implications of rising stock-based pay...

Although exercise prices for executive stock options can be set either below or above the grant-date market price, in practice virtually all options are granted at the money. We offer an economic rationale for this apparent puzzle, by showing that pay-to-performance incentives for risk-averse...