Cross-sectional asset pricing tests with GMM can generate spuriously high explanatory power for factor models when the moment conditions are specified such that they allow the estimated factor means to substantially deviate from the observed sample averages. In fact, by shifting the weights on...

Cross-sectional asset pricing tests with GMM can generate spuriously high explanatory power for factor models when the moment conditions are specified such that they allow the estimated factor means to substantially deviate from the observed sample averages. In fact, by shifting the weights on...

Cross-sectional asset pricing tests with GMM can generate spuriouslyhigh explanatory power for factor models when the moment conditions are specifiedsuch that they allow the estimated factor means to substantially deviate from theobserved sample averages. In fact, by shifting the weights on the...

It is well-known that outliers exist in the type of multivariate data used by financial practitioners for portfolio construction and risk management. Typically, outliers are addressed prior to model fitting by applying some combination of trimming and/or Winsorization to each individual...

The paper investigates the properties of a portfolio composed of a large number of assets driven by a strong multivariate GARCH(1,1) process with heterogeneous parameters. The aggregate return is shown to be a weak GARCH process with a (possibly large) number of lags, which reflect the moments...

The accuracy of variance prediction depends on both the specification and the accuracy of parameter estimation. To predict stock return variance in a large and ever-changing universe, this paper proposes to replace the classic time-series dynamics specification per each name with a...

We develop a methodology for estimating and testing the effect of anomalies in conditional asset pricing models when premia are time-varying. Our method, which builds on the two-pass methodology, is developed for ordinary and weighted least-squares estimation, considering both cases of correct...

We study how the distribution of stock returns is influenced through investor opinion by applying expectile regression to abnormal NASDAQ returns over the period April 2015 - August 2019. Thereby, we differentiate between different aspects of investor opinion: investor perception, attention and...

Ethical investments have become increasingly popular over the past years. Ethical funds restrict their investment based on environmental, social and/or ethical criteria. Prior research on the performance of ethical versus non-ethical funds yields mixed results. This paper investigates the...

Measuring risk in the stock market context is one of the key challenges of modern finance. Despite of the substantial significance of the topic to investors and market regulators, there is a controversy over what risk factors should be used to price the assets or to determine the cost of...