The capital asset pricing model (CAPM) receives both criticism and widespread adoption by practitioners and academics as the weighted average cost of capital (WACC) equity component. This study introduces two new costs of equity measures to address CAPM criticisms and provide new perspective on...

Presentation Slides for "Overconfidence, Arbitrage, and Equilibrium Asset Pricing" This paper offers a model in which asset prices reflect both covariance risk and misperceptions of firmsapos prospects, and in which arbitrageurs trade against mispricing. In equilibrium, expected returns are...

The basic paradigm of asset pricing is in vibrant flux. The purely rational approach is being subsumed by a broader approach based upon the psychology of investors. In this approach, security expected returns are determined by both risk and misvaluation. This survey sketches a framework for...

The value premium is the empirical observation that low market/book “value” stocks have higher returns than high market/book “growth” stocks. In this paper, we investigate and present evidence for an “equity as a call option hypothesis” for the value premium. Volatility decreases the...

The purpose of the article is to analyse the impact of various financial ratios used to evaluate a company’s liquidity and solvency on the rates of return on the shares of companies listed on the Warsaw Stock Exchange. In the context of developing countries, the relationship between liquidity...

The capital asset pricing model (CAPM) receives both criticism and widespread adoption by practitioners and academics as the weighted average cost of capital (WACC) equity component. This study introduces two new costs of equity measures to address CAPM criticisms and provide new perspective on...

The q-factor model shows strong explanatory power and largely summarizes the cross section of average stock returns. In particular, the q-factor model fully subsumes the Fama-French (2018) 6-factor model in head-to-head factor spanning tests. The q-factor model is an empirical implementation of...

I show that an asset pricing model for the equity claims of a value-maximizing firm can be constructed from its optimal financial contracting behavior. I study a dynamic contracting model in which firms trade off the costs and benefits of a given promise to pay external lenders in a specific...

We take a simple q-theory model and ask how well it can explain external financing anomalies, both qualitatively and quantitatively. Our central insight is that optimal investment is an important driving force of these anomalies. The model simultaneously reproduces procyclical equity issuance...

I review the empirical literature on word of mouth (WOM) among investors. I begin with an outline of the empirical challenges that WOM research faces and possible strategies to overcome those challenges. I then discuss recent studies on WOM among retail and institutional investors. The research...