We analyze a multi-period model of capital gains taxation with endogenous prices. Relative to an economy without taxation, a capital gains tax tends to lower prices and increase returns. Abstracting from tax redistribution policies, we find that a taxable investor's welfare falls, a nontaxable...

One of the main explanations for the idiosyncratic volatility (IVOL) puzzle (i.e., the negative relation between lagged IVOL and returns) is a missing risk factor. We show analytically that if IVOL proxies for a missing risk factor, then the negative relation between IVOL and returns should...

This paper studies the estimation of asset pricing model regressions with conditional alphas and betas, focusing on the joint effects of data snooping and spurious regression. We find that the regressions are reasonably well specified for conditional betas, even in settings where simple...