Economists have long recognized the importance of information veracity in valuing risky securities. Market participants concerned about the credibility of information measures may require additional compensation to entice them to hold stocks with less transparent information. These same...

In this paper we study whether the commodity futures market predicts the commodity spot market. Using historical daily data on four commodities—oil, gold, platinum, and silver—we find that they do. We then show how investors can use this information on the futures market to devise trading...

Bali et al. (2011) uncover a new anomaly (the “MAX effect”) related to investors’ desire for stocks with lottery-like payoffs. Specifically, stocks with high maximum daily returns (high MAX) over the past month perform poorly relative to stocks with low maximum daily returns (low MAX) over...

This study explores the effect of investor sentiment on the volatility forecasting power of option-implied information. We find that the risk-neutral skewness has the explanatory power regarding future volatility only during high sentiment periods. Furthermore, the implied volatility has varying...

Behavioral theories predict that firm valuation dispersion in the cross-section (“dispersion”) measures aggregate overpricing caused by investor overconfidence and should be negatively related to expected aggregate returns. This paper develops and tests these hypotheses. Consistent with the...

This study examines the influence of investor sentiment on the relationship between disagreement among investors and future stock market returns. We find that the relationship between disagreement and future stock market returns time-varies with the degree of investor sentiment. Higher...

The German universal long-term care (LTC) insurance program offers beneficiaries the choice between in-kind services and a cash benefit, which can be used for anything, including informal care. The optimal level of the cash benefit depends on substitution between formal and informal care...

The popularity of sustainable investments is unbroken and attracts investors and researchers alike. Modelling the properties of such 'green' firms, Pástor, Stambaugh, and Taylor 2021 consider a hedge against climate risks in their theoretical model. Likewise, it could be assumed that companies...

A healthy financial system encourages the efficient allocation of capital and risk. The collapse of the house price bubble led to the financial crisis that started in 2007. There is a large empirical literature concerning the relation between asset price bubbles and financial crises. I evaluate...

This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...