We combine self-collected historical data from 1867 to 1907 with CRSP data from 1926 to 2012, to examine the risk and return over the past 140 years of one of the most popular mechanical trading strategies - momentum. We find that momentum has earned abnormally high risk-adjusted returns - a...

In this paper, we provide evidence on two alternative mechanisms of interaction between returns and volatilities: the leverage effect and the volatility feedback effect. We stress the importance of distinguishing between realized volatility and implied volatility, and find that implied...

We use a sample of option prices, and the method of Bakshi, Kapadia and Madan (2003), to estimate the ex ante higher moments of the underlying individual securities' risk-neutral returns distribution. We find that individual securities' volatility, skewness, and kurtosis are strongly related to...

An alternative derivation of the yield curve based on entropy or the loss of information as it is communicated through time is introduced. Given this focus on entropy growth in communication the Shannon entropy will be utilized. Additionally, Shannon entropy's close relationship to the...

Finance researchers keep producing increasingly complex and computationally-intensive models of stock returns. Separately, professional analysts forecast stock returns daily for their clients. Are the sophisticated methods of researchers achieving better forecasts or are we better off relying on...

We evaluate the performance of various methods for estimating factor returns in an approximate factor model. Differences across estimators are most pronounced when there is cross-sectional heteroskedasticity, or when cross-sectional sample sizes, n, are below 4,000 assets. Estimators...

We have seen China's growing role in the past decades, and the world economy has become more exposed to the influence of China. This paper explores emerging China's impact on the global equity market through the lens of asset pricing. We study the predictive properties of the lagged China...

The accurate forecast of the foreign currencies exchange rates at the ultra high frequency electronic trading in the foreign currencies exchange markets is a main topic of our research: 1) the present state of the foreign currencies exchange markets in Asia, Europe and North America; 2) the...

Value and momentum returns and combinations of them are explained by their loadings on global macroeconomic risk factors across both countries and asset classes. These loadings describe why value and momentum have positive return premia while at the same time being negatively correlated. The...