The confluence of three trends in the U.S. residential housing market-rising home prices, declining interest rates, and near-frictionless refinancing opportunities-led to vastly increased systemic risk in the financial system. Individually, each of these trends is benign, but when they occur...

The confluence of three trends in the U.S. residential housing market - rising home prices, declining interest rates, and near-frictionless refinancing opportunities - led to vastly increased systemic risk in the financial system. Individually, each of these trends is benign, but when they occur...

The derivation of observable implications of the conditional CAPM theory often includes the joint (internally inconsistent) hypothesis that the stock portfolio used in the tests is the theoretical, mean-variance efficient, market portfolio. The present paper generalizes this derivation by...

The battle between proponents of the Efficient Markets Hypothesis and champions of behavioral finance has never been more pitched, and little consensus exists as to which side is winning or the implications for investment management and consulting. In this article, I review the case for and...

This paper theoretically reconciliates the several types of value premiums observed in cross-section with the use of aggregate scaled-price ratios - including "value spreads" - as price of risk proxies in time series. Prices in scaled-price ratios reflect risk premiums (and the price of risk),...

This paper offers theoretical, empirical, and simulated evidence that momentum regularities in asset prices are not anomalies. Within a general, frictionless, rational expectations, risk-based asset pricing framework, riskier assets tend to be in the loser portfolios after (large) increases in...

If price and quantity are the fundamental building blocks of any theory of market interactions, the importance of trading volume in understanding the behavior of financial markets is clear. However, while many economic models of financial markets have been developed to explain the behavior of...

The high cost of capital for firms conducting medical research and development (R&D) has been partly attributed to the government risk facing investors in medical innovation. This risk slows down medical innovation because investors must be compensated for it. We propose new and simple financial...

The value added by an active investor is traditionally measured using alpha, tracking error, and the information ratio. However, these measures do not characterize the dynamic component of investor activity, nor do they consider the time horizons over which weights are changed. In this paper, we...

X-value normalizes stock prices by the recursive out-of-sample expectation of each firm's net income, estimated by industry from its financials, while ignoring book equity. The resulting X-value factor is unspanned by the five Fama/French factors individually or in different combinations, and...