The article presents a Bayesian nonparametric approach to model the Pricing Kernel (PK), defined as the present value of the ratio between the risk neutral density, q, and a modified physical density, p*. The risk neutral density is estimated from option data and the modified physical density is...

Technological revolutions are often accompanied by substantial stock price reversals, but previous literature has produced competing explanations for why this is the case. This paper brings new evidence to this debate using data from the innovation-driven British Bicycle Mania of 1895-1900, in...

The risk of infrastructure investments is driven by unique factors that cannot be well described by standard asset class factor models. We thus create a nine-factor model based on infrastructure-specific risk exposure, i.e., market risk, size, value, momentum, cashflow volatility, leverage,...

The stock market capitalization of emerging market economies increased from $171 billion in 1986 to $1.9 trillion in 1995 (Gay, 2008). Over the next ten years it grew to $5 trillion in 2005 (Yartey, 2008). A transition towards deregulation of the economy and privatization of state-owned...

In 2008, Epstein and Schneider formulated a microstructure-inspired theory in which one could determine price volatility through a number of other market parameters such as asset volatility, risk free rate and dividend rate. A particular feature of the Epstein-Schneider theory is an extremely...

We consider the exact analytical pricing of an European option written on the spread between two correlated underlying assets. General model-independent properties of the option price are observed and an exact analytical expression for the spread option value is derived in the case of two...

This paper extends recent discussion on the effectiveness of mutual fund performance measures. We utilize the well-known value premium to examine the ability of mutual fund performance measures to distinguish between the results of value funds and growth funds. Specifically, we examine the...

Under the assumption of perfect foresight, the paper overlooks the one of two elements of market timing: market return sign forecasting. With that, the paper focuses on the second: the ability to constitute a portfolio with the most “relevant” assets. This paper looks exclusively on the...

The calculation of expected returns is a necessary ingredient in data processing for an event study. The method most commonly used, the market model, often fails to meet the OLS requirement of normally distributed residuals, and tends to furnish regression output (low R2, and insignificant t-...

This paper evaluates a specification for conditional beta models following Fama and French (2019). In this paper, I reject the Fama and French model that assumes characteristics are conditional betas in favor of a linear conditional beta model following Shanken (1990). Model-implied zero-beta...