Traditional portfolio optimization models specify placement of capital as rather irrevocably and fully at risk through investment horizon(s) or continuously. Under this constraint, asset class allocation typically serves as primary mode of diversification, pursuing risk moderation by seeking to...

Hundreds of papers and hundreds of factors attempt to explain the cross-section of expected returns. Given this extensive data mining, it does not make any economic or statistical sense to use the usual significance criteria for a newly discovered factor, e.g., a t-ratio greater than 2.0....

We provide some new tools to evaluate trading strategies. When it is known that many strategies and combinations of strategies have been tried, we need to adjust our evaluation method for these multiple tests. Sharpe Ratios and other statistics will be overstated. Our methods are simple to...

As part of its monetary policy strategy, the European Central Bank has formulated a reference value for M3 growth. A pre-requisite for the use of a reference value for M3 growth is the existence of a stable demand function for that aggregate. However, a large empirical literature has emerged...

Stockholders are faced with both macroeconomic uncertainty and uncertainty that is generated from fears. We develop a financial stress factor as a proxy for pessimism that operates through stockholders' expectations about the elevated market volatility and shocks the cross-section of stock...

This paper employs the ZCAPM asset pricing model of Liu, Kolari, and Huang (2018) to show that momentum returns are highly related to market risk arising from return dispersion (RD). Cross-sectional tests show that momentum risk loadings and RD risk loadings are similarly priced in momentum...

The estimation of the holding periods of financial products has to be done in a dynamic process in which the size of the observation time interval influences the result. Small intervals will produce smaller average holding periods than bigger ones. The approach developed in this paper offers the...

This paper provides empirical evidence on life-cycle patterns in the asset allocation of Swedish households. Data on household portfolio allocation are collected from the HINK surveys for the period 1982-1992, and portfolio shares of different asset categories are regressed on age, period, and...