This study explores multivariate methods for investment analysis based on a sample of return histories that differ in length across assets. The longer histories provide greater information about moments of returns, not only for the longer-history assets, but for the shorter-history assets as...

This study investigates whether market-wide liquidity is a state variable important for asset pricing. We find that expected stock returns are related cross-sectionally to the sensitivities of returns to fluctuations in aggregate liquidity. Our monthly liquidity measure, an average of...

A linearization of a rational expectations present value model for corporate stock prices produces a simple relation between the log dividend-price ratio and mathematical expectations of future log real dividend changes and future real discount rates. This relation can be tested using vector...

When a rate of return is regressed on a lagged stochastic regressor, such as a dividend yield, the regression disturbance is correlated with the regressor's innovation. The OLS estimator's finite-sample properties, derived here, can depart substantially from the standard regression setting....

It is sometimes argued that an increase in stock market volatility raises required stock returns, and thus lowers stock prices. This paper modifies the generalized autoregressive conditionally heteroskedastic (GARCH) model of returns to allow for this volatility feedback effect. The resulting...

This paper shows that unexpected stock returns must be associated with changes in expected future dividends or expected future returns A vector autoregressive method is used to break unexpected stock returns into these two components. In U.S. monthly data in 1927-88, one-third of the variance of...

A representative-agent model with time-varying moments of consumption growth is used to analyze implications about means and volatilities of asset returns as well as the predictability of asset returns for various investment horizons. A comparative-statics analysis using non-expected-utility...

This paper estimates expected future real interest rates and inflation rates from observed prices of UK government nominal and index-linked bonds. The estimation method takes account of imperfections in the indexation of UK index-linked bonds. It assumes that expected log returns on all bonds...