The Cox, Ross, and Rubinstein binomial model is generalized to the multinomial case. Limits are investigated and shown to yield the Black-Scholes formula in the case of continuous sample paths for a wide variety of complete market structures. In the discontinuous case a Merton-type formula is...

This paper presents results based on new data showing that the relationships involving investors' judgments of risk and variables such as beta, size, and book-to-market equity (B/M) have the same directional effects as those involving realized returns. Moreover, the relationships involving risk...

A Behavioral Approach to Asset Pricing Theory examines the reigning assumptions of asset pricing theory and reconstructs them to incorporate findings from behavioral finance. It constructs a solid, intact structure that challenges classic assumptions and at the same time provides a strong theory...