We combine self-collected historical data from 1867 to 1907 with CRSP data from 1926 to 2012, to examine the risk and return over the past 140 years of one of the most popular mechanical trading strategies - momentum. We find that momentum has earned abnormally high risk-adjusted returns - a...

Changing economic environments, geopolitical instability, and the explosive growth of emerging markets, compounded by the recent turbulence in the world's capital markets, has posed new challenges for the study of asset pricing. The following study raises questions about the existence (lack of...

Contrary to the recently reported US evidence of a negative premium, this study shows that China's economic policy uncertainty (EPU) commands a positive equity risk premium. Motivated by the observation that Chinese stock traders have a strong risk appetite and a cognitive bias, we modify the...

We combine self-collected historical data from 1867 to 1907 with CRSP data from 1926 to 2012, to examine the risk and return over the past 140 years of one of the most popular mechanical trading strategies — momentum. We find that momentum has earned abnormally high risk-adjusted returns — a...

We develop a methodology to decompose the conditional market risk premium and risk premia on higher-order moments of excess market returns into components related to contingent claims on down, up, and moderate market returns. The decompositions do not depend on assumptions about investor...

During 2008, the sudden widening of credit spreads led to a rapid decrease in the value of many financial assets, revealing a general shortage of capital for many financial institutions, with some critical peaks that required fund injection and public bailouts.The evidence of a substantial...

We investigate the relation between the risk premia observed in forward foreign exchange markets and international equity markets using the Arbitrage Pricing Theory. If returns on well-diversified equity portfolios explain movements in agents' intertemporal marginal rate of substitution then the...

This paper studies a dynamic equilibrium model of asset prices in a partially observable exchange economy. It shows that the precautionary savings motive in response to estimation uncertainty can dominate the risk aversion effect, resulting in the reduction of the equity premium over short...

We can only estimate the distribution of stock returns but from option prices we observe the distribution of state prices. State prices are the product of risk aversion – the pricing kernel – and the natural probability distribution. The Recovery Theorem enables us to separate these so as to...

Market-wide, stock market specific and real estate market specific risk - what kind of risk and to which extent drives the returns of listed real estate? Based on a structural asset pricing model calibrated to the empirical data in the U.S., we show that at least two thirds of the risk premium...