The paper examines the problem of portfolio selection based on the forecasts of unknown quality in a mean-variance framework. Early work by Treynor and Black (1973) established a relationship between the correlation of forecasts, the number of independent securities available and the Sharpe...

You're probably familiar, at least in passing, with the 'convexity' of long-term bonds - i.e. that yields dropping 1% produce a bigger price move than yields rising 1%. A significant amount of brainpower has gone into understanding all the ramifications of this convexity in the fixed income...

We build an equilibrium model to explain why stock return predictability concentrates in bad times. The key feature is that investors use different forecasting models, and hence assess uncertainty differently. As economic conditions deteriorate, uncertainty rises and investors' opinions...

The purpose of this study was to compare and contrast the predictive validity of risk tolerance questionnaires. The tested questionnaires represented measures derived from economic and psychometric theory. It was determined that questionnaires based on economic theory had similar predictive...

We investigate the benefits of forecast combination for timing equity factors based on predictive regressions using macro predictors. Relative to standard predictive regression models, forecast combination reduces the noise of forecasts and hence improves their out-of-sample predictive accuracy....

Many modern macro finance models imply that excess returns on arbitrary assets are predictable via the price-dividend ratio and the variance risk premium of the aggregate stock market. We propose a simple empirical test for the ability of such a model to explain the cross-section of expected...

Using a novel and direct measure of investor sentiment, I find that Facebook's Gross National Happiness (GNH) has the ability to predict changes in both daily returns and trading volume in the US stock market. For instance, an increase of one standard deviation in GNH is associated with an...

Using a novel and direct measure of investor sentiment, I find that Facebook's Gross National Happiness (GNH) has the ability to predict changes in both daily returns and trading volume in the US stock market. For instance, an increase of one standard deviation in GNH is associated with an...