equilibrium model with a fund offering the risk-adjusted market portfolio (RAMP), ambiguity averse investors hold the fund and an … optimal portfolio based on only one information source (price versus private signal). Asset risk premia satisfy the CAPM with …

overconfident about the signal. We find that, because overconfident traders introduce an additional source of risk, rational … bonds are an essential accompaniment of equity investment, as they serve to hedge this "sentiment risk." …

dividend yield is typically viewed as a reflection of either changing risk, related to the business cycle, or irrational … risk as well as expected return, we develop Bayesian methods to examine the interaction between the data and an investor … and a riskless asset. In general, however, the simple risk/return model of Merton (1980) explains very little of the yield …

This paper develops a rule for calculating a discount rate to value risky projects. The rule assumes that asset risk … each of these assets under any theory of debt and taxes and under any assumption about the slope and intercept of the …

the unpriced risk. We apply our methodology to hedge out unpriced risk in the Fama and French (2015) five-factors. We find …

with empirical evidence, the model shows that (a) value stocks are those with higher cash-flow risk; (b) the size of the … value premium is larger in "bad times," due to time variation in risk preferences; (c) the unconditional CAPM fails, because …

Stocks with greater downside risk, which is measured by higher correlations conditional on downside moves of the market … of return on stocks with the greatest downside risk exceeds the average rate of return on stocks with the least downside … risk by 6.55% per annum. Downside risk is important for explaining the cross-section of expected returns. In particular of …

We examine the implications of portfolio theory for the cross-sectional behavior of equity trading volume. Two …