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The aim of this paper is to study the empirical phenomenon of rating bubbles, i.e. clustering on extremely positive …
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"We show that long run consumption risk models imply that the covariance matrix of the logarithm of price to dividend (P/D) ratios of stocks has a strict factor structure. Factor analysis of the P/D ratios of 25 portfolios formed by sorting stocks based on their size and book to market ratio...
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