This article develops an intertemporal, discrete-time, competitive equilibrium version of the arbitrage pricing theory (APT) and explores the econometric implications of this model under various restrictions on investor preferences and on the dynamic behavior of dividends. We describe conditions...

We use an asymptotic principal Components technique to estimate pervasive factors influencing asset returns and to test the restrictions imposed by static and intertemporal equilibrium versions of the arbitrage pricing theory (APT) on a multivariate regression model. The empirical techniques...

This paper develops a simple model of the gap between socially and privately optimal bank lending when a bank has an overhang of impaired loans, and analyzes government policies designed to close this gap. The impaired loans have risky cash flows but observable market values. A number of basic...

Hedge funds with larger macroeconomic-risk betas do not earn higher returns, contrast to the theoretically predicted risk-return tradeoff. Meanwhile, high macro-beta funds deliver higher returns than low macro-beta funds following low-sentiment months, whereas the risk-return relation is flat...

Using political turnovers in mayoral appointments at the prefecture-city level in China, we show that investors incorporate rising local political uncertainty into bond pricing and relocate capital from municipal corporate bonds and privately issued bonds toward bonds issued by centrally...