Prior literature finds that variables that can forecast market returns in sample do not beat historical averages in forecasting market returns out of sample. We propose a naïve model averaging (NMA) method, which produces mostly positive out-of-sample R2s for the variables that are significant...

This paper builds an empirical model to connect option-implied cumulants with expected risk premia through latent risk factors. Expected risk premia on individual stocks are estimated by applying a new partial least squares-based method on risk-neutral cumulants at different orders and various...

We exploit the shift from frequent batch auctions to continuous trading at the Taiwan Stock Exchange to show that liquidity deteriorated in large-cap and efficiency significantly improved in mid-cap and small-cap after trading became continuous. Our results reveal that the migration to the...

Asset growth factor (AG) – the return on a portfolio that is long in shares of low asset growth firms and short in shares of high asset growth firms - is an economy-wide pervasive risk factor in the widely used Fama and French (2015) five-factor model (FF5) and in the Hou, Xue, and Zhang...