We investigate the relation between the risk premia observed in forward foreign exchange markets and international equity markets using the Arbitrage Pricing Theory. If returns on well-diversified equity portfolios explain movements in agents' intertemporal marginal rate of substitution then the...

This paper investigates the nature of observed deviations from the unbiased expectations hypothesis in the forward foreign exchange market. If these deviations are due to risk premia then the same premia should be observed in nominal bonds denominated in different currencies. This condition...

This paper develops a theory and econometric method of portfolio performance measurement using a competitive equilibrium version of the Arbitrage Pricing Theory. We show that the Jensen coefficient and the appraisal ratio of Treynor and Black are theoretically compatible with the Arbitrage...

This paper studies the pricing of commonly used systematic risk factors across investment horizons of up to five years. In a classical one-period asset-pricing model, high expected returns are achieved only by accepting high levels of systematic risk. However, allowing for heterogeneous...

Investors are natural risk bearers, in part due to the vast array of risk management tools available to them. These tools allow a risk budgeting process that de-couples the asset allocation and active bets taken in the portfolio. The risk of non-traded assets in the portfolio can be reduced by...

This paper considers two methods of estimating factor mimicking portfolios from asset returns: Two-pass cross-sectional regression and asymptotic principal components. We show that, for a balanced panel of assets, iterating the two-pass cross-sectional regression converges to the same estimated...

We estimate latent factor models of liquidity, aggregated across various liquidity measures. Shocks to assets' liquidity have a common component across measures which accounts for most of the explained variation in individual liquidity measures. We find that across-measure systematic liquidity...

We estimate latent factor models of liquidity, aggregated across various liquidity measures. Shocks to assets' liquidity have a common component across measures which accounts for most of the explained variation in individual liquidity measures. We find that across-measure systematic liquidity...

A wide variety of official capital controls across countries makes it difficult to perform cross-sectional analysis of the effects of market segmentation. This article constructs a measure of deviations from capital market integration that can be consistently applied across countries. It...