This paper proposes alternative specifications of the conditional CAPM with dynamic conditional beta and tests the models' performance in explaining the value premium for the period 1963-2011. The conditional alphas on the value-minus-growth portfolio are estimated to be economically and...

This paper shows that firm growth potential – representing a firm's yet-unexercised growth opportunities – is associated with option overpricing and low future delta-hedged option returns. We provide an explanation of this phenomenon based on the idea that retail investors exert buying...