This paper studies the predictive power of expected volatility in the cross-section of expected stock returns. Evidence indicates that total and idiosyncratic volatility levels and volatility innovations have predictive power in the cross-section of expected excess stock returns. The results...

This paper proposes a novel approach to determine whether mutual funds time the market. The proposed approach builds on a heterogeneous agent model, where investors switch between cash and stocks depending on a certain switching rule. This represents a more flexible, intuitive, and parsimonious...

We propose a theoretical framework of exchange rate behavior where investors focus on a subset of economic fundamentals. We find that any adjustment in the set of predictors used by investors leads to changes in the relation between the exchange rate and fundamentals. We test the validity of...