In this paper we develop the rst estimator of the covariance matrix that relies solely onforward-looking information. This estimator only uses price information from a cross-sectionof plain-vanilla options. In an out-of-sample study for US blue-chip stocks we show that aminimum-variance strategy...

The overvaluation hypothesis (Miller 1977) predicts that a) stocks are overvalued inthe presence of short selling restrictions and that b) the overvaluation increases in the degree ofdivergence of opinion. We design an experiment that allows us to test these predictions in thelaboratory. The...

Recent empirical research suggests that measures of investor sentimenthave predictive power for future stock returns over the intermediate and longterm. Given the widespread publication of sentiment indicators, smart investorsshould trade on the information conveyed by such indicators and...