On the basis of raw return analysis, economically significant anomalies appear to exist in relation to the size, momentum, book-to-market and profitability of Australian firms. However, characteristic-sorted portfolios are shown to load in very particular ways on multiple risk factors. After...

We study an economy populated by three groups of logarithmic agents: Constrained agents subject to a portfolio constraint that limits their risk-taking, unconstrained agents subject to a standard nonnegative wealth constraint, and arbitrageurs with access to uncollateralized credit. Such credit...

We document a reliable positive relation between excess volatility and the cross-section of stock returns over the sample period of 1963 to 2010. Significantly positive differentials have been found between the two decile portfolios with the largest and the least excess volatility, under all the...

We study an economy populated by three groups of myopic agents: constrained agents subject to a portfolio constraint that limits their risk taking, unconstrained agents subject to a standard nonnegative wealth constraint, and arbitrageurs with access to a credit facility. Such credit is valuable...

Human beings want to believe that good outcomes in the future are more likely, but also want to make good decisions that increase average outcomes in the future. We consider a general equilibrium model with complete markets and show that when investors hold beliefs that optimally balance these...

We propose an equilibrium asset pricing model in which agents with heterogeneous beliefs care about relative performance. We find that the concern with relative performance leads agents to trade more similarly, a development that has two effects. First, similar trading directly decreases...

Many studies investigate the impact of heterogeneous beliefs in the first moment, while very few in the second moment. This is partially due to continuous-time setup which makes it difficult to incorporate heterogeneous beliefs in the second moment. In a two-period exponential–normal model...

Alternative assets, such as private equity, hedge funds, and real assets, are illiquid and opaque, and thus pose a challenge to traditional models of asset allocation. In this paper, we study asset allocation and asset pricing in a general-equilibrium model with liquid assets and an alternative...

We analyze how a benevolent, privately informed government agency would optimally release information about the economy׳s growth rate when the agents hold heterogeneous beliefs. We model two types of agent: “conforming” and “dissenting.” The former has a prior that is identical to that...

We are the first to investigate the cross-section of stock returns in the new emerging equity markets, the so-called frontier emerging markets. Our unique survivorship-bias free data set consists of more than 1400 stocks over the period 1997 to 2008 and covers 24 of the most liquid frontier...