We propose a duration-based explanation for the major equity risk factors, including value, profitability, investment, low-risk, and payout factors. Both in the US and globally, these factors invest in firms that earn most of their cash flows in the near future. The factors could therefore be...

We study individual coherent preferences underlying asset prices and propose a set of explicit models for nonlinear V-shaped price pressure utility in a new framework. Coherent preferences are consistent interactive choices between momentum trading and reversal trading in stock market where...

Using survey forecasts, we find that systematic errors in expectations of long-term inflation and short-term nominal earnings growth are the main driver of prices and return puzzles for bonds and stocks. We demonstrate this by deriving and testing a single necessary and sufficient condition...

Findings from brain sciences show that the brain must first optimize on its own internal resources before seeking to optimize on the resources available in the external world. We show that this modest change is perspective, from resource-constrained humans to resource-constrained brains,...

Using data from a decade of surveys of corporate managers, I find evidence that firms with higher expected stock returns have a higher perceived cost of equity and use higher discount rates in capital budgeting. Variation in expected stock returns, as measured by exposure to equity risk factors,...

On financial markets, information is a highly demanded resource and processing it to (potentially) generate excess returns drives the activities of many market participants. Not surprisingly, this high relevance of information in markets culminates in a high research interest focusing on how...

Despite increasing research on the relationship between behavioral factors and investment performance, little is known about the perspective of emerging markets like Bangladesh. This paper investigates the mediating role of socio-political factors in explaining the relationship between...

We use a standard consumption-based asset pricing model incorporating conditioning information to explain the risk-return profile of currency carry trade portfolios. We use a scaled stochastic discount factor instead of scaled or managed portfolio returns as in previous work. Our conditioning...

We use a standard consumption-based asset pricing model incorporating conditioning information to explain the risk-return profile of currency carry trade portfolios. We use a scaled stochastic discount factor instead of scaled or managed portfolio returns as in previous work. Our conditioning...

When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...