We combine self-collected historical data from 1867 to 1907 with CRSP data from 1926 to 2012, to examine the risk and return over the past 140 years of one of the most popular mechanical trading strategies - momentum. We find that momentum has earned abnormally high risk-adjusted returns - a...

Does heterogeneity matter for asset pricing? Starting with an irrelevance result, I classify the literature into two groups of papers taking different routes to make heterogeneity relevant for asset prices. The first group discusses models of investors who differ in terms of their preferences,...

We combine self-collected historical data from 1867 to 1907 with CRSP data from 1926 to 2012, to examine the risk and return over the past 140 years of one of the most popular mechanical trading strategies — momentum. We find that momentum has earned abnormally high risk-adjusted returns — a...

Using a semi-supervised topic model on 7,000,000 New York Times articles spanning 160 years, we test whether topics of media discourse predict future stock and bond market returns to test rational and behavioral hypotheses about market valuation of disaster risk. Focusing on media discourse...

Supported by empirical examples, this paper provides a theoretical analysis on the impacts of using a suboptimal information set for the estimation of the empirical pricing kernel and, more in general, for the validity of the fundamental theorems of asset pricing. While inferring the...

We study the relation between cognitive abilities and stockholding using the recent Survey of Health, Ageing and Retirement in Europe (SHARE), which has detailed data on wealth and portfolio composition of individuals aged 50+ in 11 European countries and three indicators of cognitive abilities:...

This paper provides evidence that reference price distributions can predict stocks' expected returns. We develop a model based on the disposition effect by considering shareholders' trading activities with different relative capital gains. The model suggests that both disposition-prone...

When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...

This paper examines whether sell-side security analysts follow momentum or create momentum by themselves for recommending stocks. We employ an indirect method of testing the role of analysts by assigning projected recommendation scores for the neglected stocks to mitigate the so-called...