As opposed to the “low beta low risk” convention, we show that low beta stocks are illiquid and exposed to high liquidity risk. After adjusting for liquidity risk, low beta stocks no longer outperform high beta stocks. Although investors who “bet against beta” earn a significant beta...

We use a standard consumption-based asset pricing model incorporating conditioning information to explain the risk-return profile of currency carry trade portfolios. We use a scaled stochastic discount factor instead of scaled or managed portfolio returns as in previous work. Our conditioning...

We use a standard consumption-based asset pricing model incorporating conditioning information to explain the risk-return profile of currency carry trade portfolios. We use a scaled stochastic discount factor instead of scaled or managed portfolio returns as in previous work. Our conditioning...