Implied expected returns are the expected returns for which a supposedly mean-variance efficient portfolio is effectively efficient given a covariance matrix. We analyze the statistical properties of monthly implied expected return estimates and study their sensitivity to the choice of a...

We use firm characteristics to estimate the enduring momentum probabilities for past winners (losers) to continue to be future winners (losers). The enduring momentum probability is significantly related to stock return persistence and explains cross-sectional expected returns. In addition, it...

In an intertemporal equilibrium asset pricing model featuring disappointment aversion and changing macroeconomic uncertainty, we show that besides the market return and market volatility, three disappointment-related factors are also priced: a downstate factor, a market downside factor, and a...

It is now an accepted fact that the majority of financial markets worldwide are neither normal nor constant, and South Africa is no exception. One idea that can be used to understand such markets and has been gaining popularity recently is that of regimes and regime-switching models. In this...

This paper illustrates the use of equity P/E factor models to analyze a traditional value portfolio and shows that -- despite the strategy's focus on price -- systematically tilting toward stocks with low price-to-book can result in a portfolio with:1) Expensive bets on industry growth hidden by...

In this paper we present the results of performance tests for several high active share, long-only US large-cap strategies based on P/E Factor Models over periods from Jan 2001 through March 2014. The results indicate:• The model's approach to normalizing P/E for varying business factor...

The performance of dynamic trading and investment strategies can be difficult to predict. Although not without its problems, analysis of the historical performance of a strategy can provide valuable insight into its general risk and return properties. Furthermore, historical analysis allows one...

Three concepts: stochastic discount factors, multi-beta pricing and mean-variance efficiency, are at the core of modern empirical asset pricing. This chapter reviews these paradigms and the relations among them, concentrating on conditional asset-pricing models where lagged variables serve as...

This paper examines the out-of-sample performance of asset allocation strategies that use conditional multi-factor models to forecast expected returns and estimate the future variance and covariance. We find that strategies based on conditional multi-factor models outperform strategies based on...

The aim of this paper is to study the cross-sectional effects present in the market using a new framework based on graph theory. Within this framework, we represent the evolution of a dynamic portfolio, i.e. a portfolio whose weights vary over time, as a rank-based multivariate model where the...