Nontrivial diversification possibilities arise when a factor model describes security returns. In this paper, we …. First, increasing the number of securities included in the analysis dramatically improves basis portfolio performance. Our …-MacBeth portfolio formation procedure, which we call the minimum idiosyncratic risk portfolio formation procedure, outperformed the Fama …

volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent …

The non-tradability of human capital is often cited for the failure of traditional asset pricing theory to explain … agents' portfolio holdings. In this paper we argue that the opposite might be true --- traditional models might not be able … to explain agent portfolio holdings because they do not explicitly account for the fact that human capital does trade (in …

deviations of portfolio concentrations in domestic relative to foreign risky assets, or "home bias", from what standard finance … opportunity costs of managing risky assets in determining whether to hold these assets, and how the assets' portfolio shares vary …

price bubbles, portfolio choice, mutual fund flows, trading volume, and firm profitability, among others …

this general issue, namely the effect of exchange rate variability on capital flows and international portfolio … diversification. More precisely, we examine how different monetary policies -- and among those, policies that aim at stabilizing … international portfolio composition and trade in assets, when international asset markets are incomplete …

is driven by the economic growth rate, which in turn depends on individual portfolio decisions. Higher inflation due to … higher money growth lowers the real interest rate (on money) and tilts the portfolio choice towards physical capital …