This paper investigates the relation between returns on stock indices and their corresponding futures contracts in order to evaluate potential explanations for the pervasive yet anomalous evidence of positive, short-horizon portfolio autocorrelations. Using a simple theoretical framework, we...

It is widely known that conditional covariances of asset returns change over time. Researchers adopt many strategies to accommodate conditional heteroskedasticity. Among the most popular are: (a) chopping the data into short blocks of time and assuming homoskedasticity within the blocks, (b)...

This paper reconsiders the literature on tax options by examining the ability to defer net capital gains realizations within an equity portfolio whose constituents change over time. Unlike previous studies on the value of tax options, this paper examines after-tax returns to shareholders within...

We distinguish the measure of risk aversion from the slope coefficient in the linear relationship between the mean excess return on a stock index and its variance. Even when risk aversion is constant, the latter can vary significantly with the relative share of stocks in the risky wealth...

We document a large decrease in autocorrelation and increase in variance of recent short-run returns on several broad stock market indexes, over the 1983-89 period, 15-minute returns went from being highly positively serially correlated to practically uncorrelated. Over the past twenty years,...

The major bull and bear markets of this century have suggested to many that large decade-to-decade stock market swings reflect irrational "fads and fashions" that periodically sweep investors. We argue instead that investors have perceived significant shifts in the long-run mean rate of future...

Monthly stock returns from Smith and Cole [1935], Macaulay [1938] and Cowles [1939J are compared and contrasted with the returns to the CRSP value and equal-weighted portfolios of New York Stock Exchange (NYSE) stocks. Daily stock returns from Dow Jones [1972] and Standard & Poor's [1986] are...

The composite index of leading indicators is found to be a valuable tool for predicting not only the direction but also the size of near- term changes in aggregate economic activity. This conclusion is based on assessments of the leading index as a predictor of (1) business cycle turning points...

We create a newspaper-based Equity Market Volatility (EMV) tracker that moves with the VIX and with the realized volatility of returns on the S&P 500. Parsing the underlying text, we find that 72 percent of EMV articles discuss the Macroeconomic Outlook, and 44 percent discuss Commodity Markets....

We study the temporal behavior of the cross-sectional distribution of assets' market exposure, or betas, using a large panel of high-frequency returns. The asymptotic setup has the sampling frequency of the returns increasing to infinity, while the time span of the data remains fixed, and the...