We decompose the squared VIX index, derived from US S&P500 options prices, into the conditional variance of stock returns and the equity variance premium. The latter is increasing in risk aversion in a wide variety of economic settings. We tackle several measurement issues assessing a plethora...

We present a latent variable model of dividends that predicts, out-of-sample, 39.5% to 41.3% of the variation in annual dividend growth rates between 1975 and 2016. Further, when learning about dividend dynamics is incorporated into a long-run risks model, the model predicts, out-of-sample,...

We distinguish the measure of risk aversion from the slope coefficient in the linear relationship between the mean excess return on a stock index and its variance. Even when risk aversion is constant, the latter can vary significantly with the relative share of stocks in the risky wealth...

Monthly stock returns from Smith and Cole [1935], Macaulay [1938] and Cowles [1939] are compared and contrasted with the returns to the CRSP value and equal-weighted portfolios of New York Stock Exchange (NYSE) stocks. Daily stock returns from Dow Jones [1972] and Standard amp; Poor's [1986] are...

Mutual fund managers can outperform the market by picking stocks or timing the market successfully. Previous work has estimated picking and timing skill, assuming that each manager is endowed with a fixed amount of each and found some evidence of picking skills and little evidence of timing...

Financial economists in recent years have closely examined and intensely debated the performance of initial public offerings using data after the formation of NASDAQ. The paper seeks to shed light on this controversy by undertaking a large, out-of-sample study: we examine the performance for up...

Profitability, as measured by gross profits-to-assets, has roughly the same power as book-to-market predicting the cross-section of average returns. Profitable firms generate significantly higher average returns than unprofitable firms, despite having, on average, lower book-to-markets and...

We explore the impact of investment-specific technology (IST) shocks on the crosssection of stock returns. IST shocks reflect technological advances embodied in new capital goods. Using a structural model, we show that IST shocks have a differential effect on the two fundamental components of...

Counter to extant stylized facts, using newly available data on country allocations in U.S. investors' foreign equity portfolios we find that (i) U.S. investors do not exhibit returns-chasing behavior, but, consistent with partial portfolio rebalancing, tend to sell past winners; and (ii) U.S....

The largest commercial bank stocks, ranked by total size of the balance sheet, have significantly lower risk-adjusted returns than small- and medium-sized bank stocks, even though large banks are significantly more levered. We uncover a size factor in the component of bank returns that is...