This paper empirically describes how the risk premiums of size portfolios vary with macro-economic fluctuations in the price of risk at the portfolio formation dates, thereby explaining the lack of robustness involving the unconditional size premium: Only portfolios formed in "bad" states - with...

I find no evidence that partial least squares based on disaggregated book-to-market ratios produces a model of market premiums with persistently positive out-of-sample R2, as originally documented for market returns. This is consistent with time variation in predictability, for example, and does...

Tests of the conditional CAPM are often based on the joint (internally inconsistent) hypothesis that the stock portfolio used in the tests is the theoretical, mean-variance efficient, market portfolio. I derive a new test based exclusively on the theory in the conditional CAPM. According to this...

This paper theoretically reconciliates the several types of value premiums observed in cross-section with the use of aggregate scaled-price ratios - including "value spreads" - as price of risk proxies in time series. Prices in scaled-price ratios reflect risk premiums (and the price of risk),...

This paper offers theoretical, empirical, and simulated evidence that momentum regularities in asset prices are not anomalies. Within a general, frictionless, rational expectations, risk-based asset pricing framework, riskier assets tend to be in the loser portfolios after (large) increases in...

Within a standard risk-based asset pricing framework with rational expectations, realized returns have two components: Predictable risk premiums and unpredictable shocks. In bad times, the price of risk increases. Hence, the predictable fraction of returns - and predictability - increases....

This paper documents empirically that increases in the book-to-market spread predict larger market premiums in sample and larger size, value, and investment premiums (also) out of sample. In addition, increases in the investment (or profitability) spread exclusively predict larger investment (or...

This paper theoretically links the stock characteristics size and value to risks. The size premium arises – and spans the value premium – exclusively for portfolios formed in high market price of risk states. This is when the cross-sectional differences in risk premiums dominate the...

X-value normalizes stock prices by the recursive out-of-sample expectation of each firm's net income, estimated by industry from its financials, while ignoring book equity. The resulting X-value factor is unspanned by the five Fama/French factors individually or in different combinations, and...

This paper unifies macro-finance and multifactor asset pricing theories to show that, in sample and out of sample: (i) Larger cross-sectional book-to-market medians and spreads - price of risk proxies - predict larger market (in sample), size, value, and investment premiums; (ii) the investment...