This paper makes indirect inference about the time-variation in expected stock returns by comparing unconditional sample variances to estimates of expected conditional variances. The evidence reveals more predictability as more information is used, and no evidence that predictability has...

We construct accounting-based costs of equity for dollar neutral long-short trading strategies formed on a comprehensive list of anomaly variables. These variables include book-to-market, size, composite issuance, net stock issues, abnormal investment, asset growth, investment-to-assets,...

We find that price momentum in stocks was a pervasive phenomenon during the Victorian age (1866-1907) as well. Momentum strategy profits have little systematic risk even at business cycle frequencies; disappear periodically only to reappear later; exhibit long run reversal; and are higher...

A key result of the Capital Asset Pricing Model (CAPM) is that the market portfolio---the portfolio of all assets in which each asset's weight is proportional to its total market capitalization---lies on the mean-variance efficient frontier, the set of portfolios having mean-variance...

Noise traders are agents whose theoretical existence has been hypothesized as a way of solving certain fundamental problems in Financial Economics. We briefly review the literature on noise traders. The is an entry for The New Palgrave: A Dictionary of Economics, 2nd Edition (Palgrave Macmillan:...

We study three cases in which specialized arbitrageurs lost significant amounts of capital and, as a result, became liquidity demanders rather than providers. The effects on security markets were large and persistent: Prices dropped relative to fundamentals and the rebound took months. While...

We conjecture that a mutual fund manager with superior stock selection ability is more likely to benefit from trading in stocks affected by information-events. Taking the probability of informed trading (PIN, Easley, Kiefer, O'Hara, and Paperman, 1996) to measure the amount of informed trading...

Mimicking portfolios have long been useful in asset pricing research. In most empirical applications, the portfolio weights are assumed to be fixed over time, while in theory they may be functions of the economic state. This paper derives and characterizes mimicking portfolios in the presence of...