Economic expectations play a central role in financial markets, yet investors often disagree about the economy's future. This disagreement has long been viewed as a potential driver of asset prices, but it remains unclear whether it reflects mispricing or a priced source of risk. We address this...

Return prediction with Random Fourier Features (RFF)--a very large number, P , of nonlinear trans-formations of a small number, K, of predictor variables--has become popular recently. Surprisingly, this approach appears to yield a successful out-of-sample stock market index timing strategy even...

Exploiting financial news stories data, we construct news-implied linkages and document a strong lead-lag effect of firms with shared news coverage in China’s stock market. The news-link momentum strategy generates a monthly return of 1.33% and a four-factor alpha (Liu et al., 2019) of 1.43%....

This article documents how the changing composition of U.S. publicly traded firms has prompted a decline in the long-run mean of the aggregate dividend-price ratio, most notably since the 1970s. Adjusting the dividend-price ratio for such changes resolves several issues with respect to the...

We analyze the quality of macroeconomic survey forecasts. Recent findings indicate that they are anchoring biased. This irrationality would challenge the results of a wide range of empirical studies, e.g., in asset pricing, volatility clustering or market liquidity, which rely on survey data to...

Standard equity valuation approaches (i.e., DDM, RIM, and DCF model) are derived under the assumption of ideal conditions, such as infinite payoffs and clean surplus accounting. Because these conditions are hardly ever met, we extend the standard approaches, based on the fundamental principle of...

We examine whether the distribution of trades along the set of strike prices of option contracts on the same stock contains information about underlying price discovery. We show that option traders' demand for delta exposure drives the volume-weighted average strike-spot price ratio (VWKS). In...

While economic forecasting is ubiquitous within the industry, its role in the trading process has received little attention in the literature. We examine how economist forecasts are related to trading activity in the OTC treasury bond market at the participant level. Consistent with models of...

Since insider transactions are implemented through personal accounts, the NYSE classifies these trades as retail transactions. Indeed, imbalances of retail trading and insider trading move in lockstep and predict stock returns in the cross-section. A high-minus-low strategy in retail trading...

This paper examines the relationship between liquidity fragmentation and price jumps. Unexpected changes in intraday liquidity fragmentation predict jumps and jump direction. A shock to ask (bid) side liquidity fragmentation increases the probability of positive (negative) jumps by 36%....