Using a carefully screened and filtered international database with a wide coverage across countries and size classes, this paper identifies and documents a post-1980s size effect which is persistent, not picked up by a Fama–French-style SMB, and largely due to the smallest-decile stocks. We...

We extend the constant-elasticity regression that is the default choice when equities' exposure to currencies is estimated. In a proper real-option-style model for the exporters' equity exposure to the foreign exchange rate, we argue, the convexity of the relationship implies that the elasticity...

Two regression coefficients often used in Finance, the Scholes-Williams (1977) quasi-multiperiod thin-trading beta and the Hansen-Hodrick (1980) overlapping-periods regression coefficient, can both be written as instrumental-variables estimators. Competitors are Dimson's beta and the...

Perold (2007) shows that, given a diffuse prior that is being updated in light of a noisy market price, the posterior distribution says that value-weighting and equal-weighting one's portfolio makes no difference. We argue that the diffuse prior is hard to reconcile with reality and that a...

In the debate whether country factors are typically more variable than sector factors, sparked off by e.g. Roll (1991) and Heston and Rouwenhorst (1994), one of the few uncontested facts is that the addition of emerging markets (EMs) does boost the ratio of country-factor variance relative to...

Despite of the intuitive idea that corporate governance and transparency are crucial for a country's international appeal, foreign portfolio investors appear to care first and foremost about transparency, predictability and honesty in governments. This is, at least, what our analysis of...

We generalize the Cooper and Kaplanis (1994) methodology for estimating the costs that could reconcile international portfolio holdings with CAPM predictions. First, we can simultaneously estimate inward and outward investment costs and even interactions between home and host country. Second,...

The predictability of futures returns is investigated using a semiparametric approach where it is assumed that the expected returns depend non parametrically on a combination of predictors. We first collapse the forecasting variables into a single index variable where the weights are identified...

We propose to use two futures contracts in hedging an agricultural commodity commitment to solve either the standard delta hedge or the roll-over issue. Most current literature on dual-hedge strategies is based on a structured model to reduce roll-over risk and is somehow difficult to apply for...