This study links the role of momentum and illiquidity (as proxied by Amihud's Illiq) in the cross section of stock returns in India for the period 2000-2012. Illiquidity premium is more pronounced among winners. Illiquid winners outperform liquid winners by an average 2.7% per month. We report...

This paper examines the existence of value premium in the Chinese stock markets and empirically provides its explanation. Our results suggest that the value premium does exist in the Chinese markets, and investor sophistication is significant in explaining its existence. In particular, there is...

Using a very large data set with more than 9,700 stocks listed on NYSE, AMEX and NASDAQ, we analyze overnight price jumps and report short-term investor overreaction to information shocks and document return reversal and predictability up to five days. For negative and positive overnight jumps,...

Optimal investment of firms implies that expected stock returns are tied with the expected marginal benefit of investment divided by the marginal cost of investment. Winners have higher expected growth and expected marginal productivity (two major components of the marginal benefit of...

We offer an investment-based interpretation of price and earnings momentum. The neoclassical theory of investment implies that expected stock returns are tied with the expected marginal benefit of investment divided by the marginal cost of investment. Winners have higher expected growth and...

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...

The last 30 years saw substantial increases in wealth inequality and in stock market participation, smaller increases in consumption inequality and the fraction of indebted households, a decline in interest rates and in the expected equity premium, as well as a prolonged stock market boom....

The paper explores whether the co-movement of market returns and equity fund flows can be explained by a common response to macroeconomic news. I find that variables that predict the real economy as well as the equity premium are related to mutual fund flows. Changes in dividend-price ratio...

In this paper, we explain momentum profits using innovations in aggregate economy-wide default risk. First, we show that momentum returns are positive only during high default shocks and nonexistent otherwise. Second, we present evidence suggesting that a conditional default shock factor is...

This paper investigates the relation between mutual fund flows and the real economy.The findings of this paper support the theory that the positive co-movement of flows into equity funds and stock market returns is explained by a common response to macroeconomic news.Variables that predict the...