Single factor asset pricing models face two major hurdles: the problematic time-series properties of the ex ante market risk premium and the inability of the risk measure to account for a substantial degree of the cross-sectional variation of expected excess returns. We provide an explanation...

A large body of academic research describes the optimal decisions that corporations should make, given certain assumptions and conditions. Anecdotal evidence, however, suggests that the way that corporations actually make decisions is not always consistent with the academic decision rules. In...

Final working paper version. "" Published version: The Review of Financial Studies, Volume 31, Issue 7, July 2018, pp. 2499–2552. Past fund performance does a poor job of predicting future outcomes. The reason is noise. Using a random effects framework, we reduce the noise by pooling...

In the late stages of long bull markets, a popular question arises: What steps can an investor take to mitigate the impact of the inevitable large equity correction? However, hedging equity portfolios is notoriously difficult and expensive. We analyze the performance of different tools that...

This paper provides an analysis of the predictable components of monthly common stock and bond portfolio returns. Most of the predictability is associated with sensitivity to economic variables in a rational asset pricing model with multiple betas. The stock market risk premium is the most...

Theoretical models imply fund size and performance should be negatively linked. However, empiricists have failed to uncover consistent support for this negative relation. Using a new econometric framework which includes fund-specific sensitivities to decreasing returns to scale, we find a both...

We provide some new tools to evaluate trading strategies. When it is known that many strategies and combinations of strategies have been tried, we need to adjust our evaluation method for these multiple tests. Sharpe Ratios and other statistics will be overstated. Our methods are simple to...

This paper aims to examine the contemporaneous relationship between trading volume and returns in the ETF market taking the stock market as a contrast. While past research using correlation analysis and OLS method to specify a linear regression model only catches the average relationship between...

This study investigates how equity trading activity dynamically responds to credit spread shock. Based on the analysis of monthly data from 1925M1 to 2013M7, equity trading activity, using share volume turnover as a proxy, significantly drops following the shock to credit spread. The results...

This paper is set up to dissect the covariance patterns of the returns on the commodity and equity markets. Analyzing monthly return data from 1970:M1 to 2013M7, the results show that returns on the commodity and equity markets co-vary weakly in the opposite direction (r=-0.12) in the 1970s,...