Using bilateral data on international equity and bond flows, we find that the prediction of the International Capital Asset Pricing Model is partially met and that global equity markets might be more integrated than global bond markets. Moreover, over the turbulent 1998-2001 period characterised...

Corporate bond returns in the major developed economies increase with risk, as measured by maturity and ratings. From a pricing perspective, we find little to no evidence against the World CAPM model, where the market consists out of equity, sovereign and corporate bonds. However, from a factor...

We study the effects of low short-term interest rates on the optimal portfolio allocation in Markowitz portfolios and Risk parity portfolios. We propose a measure of Portfolio Instability, gauging the amount of optimal portfolio shifts needed to respond to exogenous shocks to the expected risk...

Transaction-cost models in continuous-time markets are considered. Given that investors decide to buy or sell at certain time instants, we study the existence of trading strategies that reach a certain final wealth level in continuous-time markets, under the assumption that transaction costs,...

The Baker and Wurgler (2006) sentiment index purports to measure irrational investor sentiment, while the University of Michigan Consumer Sentiment Index is designed to largely reflect fundamentals. Removing this fundamental component from the Baker and Wurgler index creates an index of investor...

Undiversifiable (or systematic risk) has long been an enemy of investors. Many countercyclical strategies have been developed to counter this. However, like all insurance types, these strategies are generally costly to implement, and over time can significantly reduce portfolio returns in long...

We explore what private market data can tell us about the appropriate discount rates for valuing investments in climate change abatement. We estimate the term structure of discount rates for real estate up to the very long horizons relevant for investments in climate change abatement. The...

The reaction of EU bond and equity market volatilities to sovereign rating announcements (Standard & Poor's, Moody's, and Fitch) is investigated using a panel of daily stock market and sovereign bond returns. The parametric volatilities are filtered using EGARCH specifications. The estimation...

Variables with strong marginal explanatory power in cross-section asset pricing regressions typically show less power to produce increments to average portfolio returns, for two reasons. (i) Adding an explanatory variable can attenuate the slopes in a regression. (ii) Adding a variable with...

We propose a new measure of time-varying tail risk that is directly estimable from the cross section of returns. We exploit firm-level price crashes every month to identify common fluctuations in tail risk across stocks. Our tail measure is significantly correlated with tail risk measures...