assets, are trend chasers, and earn lower absolute and risk-adjusted investment returns. Notably, this behavior is a …

, even though the equal-weighted portfolio has greater portfolio risk. The total return of the equal-weighted portfolio … systematic risk and a higher alpha measured using the four-factor model. The nonparametric monotonicity relation test indicates …

-pricing theory and asymptotic analysis (for large number of assets) can be used to provide powerful solutions to mitigate … misspecification. The starting point of our analysis is the Arbitrage Pricing Theory (APT). We extend the APT to show that it can …'' portfolio that depends on factor risk premia and an ``alpha'' portfolio that depends only on pricing errors. For the beta …

excessively pessimistic. We find that because irrational traders introduce an additional source of risk, rational investors reduce … "sentiment risk." The answer to the question posed in the title is: "There is little that rational investors can do optimally to …

investors, and hence, on equity risk premia and the liquidity premium. …