As institutional investors have become more aggressive in deploying their capital, fund managers have become more creative with their product offerings. In this paper, we consider a new institutional fund of mutual funds, a portfolio that combines the best-idea stocks from two underlying primary...

This paper uses Hansen and Jagannathan's (1991) volatility bounds to evaluate models with idiosyncratic consumption risk. I show that idiosyncratic risk does not change the volatility bounds at all when consumers have CRRA preferences and the distribution of the idiosyncratic shock is...

Do investors confuse the quality of a firm with its attractiveness as an investment? If so, shares of well-run companies will be bid up too high and subsequently earn negative abnormal returns. Our analysis of Fortune magazine's annual survey of quot;America's Most Admired Companiesquot; for...

Market multiples of the largest firms are most likely to reflect efficient pricing of stocks. For such firms, variations in market multiples should be largely explained by fundamental variables, and expected returns should be positively related to beta but not significantly related to other...

This study focuses on determining whether short-term market inefficiencies exist that can be periodically exploited by investors. Berkshire Hathaway’s dual class stock with differential voting rights and one- way conversion option provides a unique opportunity to investigate this issue...

This research tries to find evidence for the Halloween effect by presenting an assessment of the profitability of the Sell in May, and go away investment strategy associated with this phenomenon. We present significant proof of the existence of the Halloween effect; it was observed in 29 of the...

The risk-free rate is an important input in one of the most widely used finance models: the Capital Asset Pricing Model. Academics and practitioners tend to use either short-term Treasury bills or long-term Treasury bonds as the risk-free security without empirical justification. This study...

This paper employs a hybrid approach that combines an adapted version of Fama-MacBeth two-pass regression with Engle-Granger cointegration test to characterize the relationship between expected stock returns and systematic risks with diverse investment horizons. We find no evidence supporting a...

In the current environment of financial distress, many governments are likely to soon become major holders of financial assets, but the policy debate focuses only on the likelihood and extent of short-term market stabilization. This paper shows that government intervention and propping up are...

We examine the option-implied volatility of the three most liquid ETFs (Diamonds, Spiders, and Cubes) and their respective tracking indices (Dow 30, S&P 500, and NASDAQ 100). We find that volatility smiles for ETF options are more pronounced than for index options, primarily because...