We analyze the impact of prior performance on the risk-taking behavior of mutual fund managers. We contribute to the existing literature by using different measures of risks, a larger data set, and an econometric approach capturing non-linear effects and assigning exact probabilities to the...

Using a complete sample of US equity options, we analyze patterns of implied volatility in the cross-section of equity options with respect to stock characteristics. We find that high-beta stocks, small stocks, stocks with a low-market-to-book ratio, and non-momentum stocks trade at higher...

We propose a new approach for the estimation of conditional asset pricing models based on a Markov Chain Monte Carlo (MCMC) approach. In contrast to existing approaches, it is truly conditional because the assumption that time variation in betas is driven by a set of conditioning variables is...

We present a simple new explanation for the diversification discount in the valuation of firms. We demonstrate that, ceteris paribus, limited liability of equity holders is sufficient to explain a diversification discount. To derive this result, we use a credit risk model based on the value of...

We analyse time-varying risk premia and the implications for portfolio choice. Using Markov Chain Monte Carlo (MCMC) methods, we estimate a multivariate regime-switching model for the Carhart (1997) four-factor model. We find two clearly separable regimes with different mean returns,...

We analyze the behavior of mutual fund managers with a special focus on the impact of prior performance. In contrast to previous studies, we do not solely focus on the volatility as a measure of risk, but also consider alternative definitions of risk and style. Using a Dynamic Bayesian Network,...

We use Bayesian model averaging to analyze the sample evidence on industry return predictability within the U.S. stock market in the presence of model uncertainty. The posterior analysis shows the importance of inflation and earnings yield in predicting industry returns. The out-of-sample...

We present a simple new explanation for the diversification discount in the valuation of firms. We demonstrate that, ceteris paribus, limited liability of equity holders is sufficient to explain a diversification discount. To derive this result, we use a credit risk model based on the value of...

We use Markov Chain Monte Carlo (MCMC) methods for the parameter estimation and the testing of conditional asset pricing models. In contrast to traditional approaches, it is truly conditional because the assumption that time variation in betas is driven by a set of conditioning variables is not...

We analyse time-varying risk premia and the implications for portfolio choice. Using Markov ChainMonte Carlo (MCMC) methods, we estimate a multivariate regime-switching model for the Carhart (1997) four-factor model. We find two clearly separable regimes with different mean returns,...