In imperfect capital markets, an entrepreneur has to invest substantial personal funds to start a private firm and is forced to bear large firm-specific risk. Furthermore, if the entrepreneur is risk averse, one would expect the private equity to earn a premium for idiosyncratic risk. In this...

We consider a linear factor APT model and assume that agents are ambiguity averse with respect to payoffs of arbitrage portfolios. In contrast to the standard result, pricing errors need not converge to zero in the limit as the number of assets goes to infinity. Even in the case of exact factor...

This paper examines the macro-spanning hypothesis for bond returns in international markets. Based on a large panel of real-time macro variables that are not subject to revisions, wefind that global macro factors have predictive power for bond returns unspanned by yield factors.Furthermore, we...