Results of recent research indicate small investor sentiment, as measured by the change in the discount on closed-end funds, is an important factor in the return generating process for common stocks. We find no evidence of it being an important factor in the return generating process. We next...

Portfolio theory is a well-developed paradigm. There are excellent textbooks on the subject. Of course, we are especially partial to our own

In a recent article in this journal, Canner, Mankiw and Weil (CMV) argue that in general popular investment advice, and in particular the investment advice of four investment advisors, is inconsistent with modern portfolio theory and is irrational. As CMV state, since portfolio theory is so well...

A great deal of the literature in financial economics contains the assumption that returns are a linear function of a set of observable factors. The specification of the variables in the linear process (known as the return-generating process) is one of the key issues in finance today. The...

The purpose of this article is to explain the spread between spot rates on corporate and government bonds. We find that the spread can be explained in terms of three elements: (1) compensation for expected default of corporate bonds (2) compensation for state taxes since holders of corporate...