Asset prices have been found to respond to unpredicted changes in macroeconomic variables in a number of studies. This paper focuses on the relationship between economic factors and the stock market for a small open economy, namely Canada. Exchange risk is observed to have a significant impact...

The term “equity premium puzzle” was coined in 1985 by economists Rajnish Mehra and Edward C. Prescott. The equity premium puzzle in considered one of the most significant questions in finance. A number of papers have explored the fundamental questions of why the premium exists and has not...

The CAPM is commonly used for an introduction of the equity cost in practice to calculate the corporate value, which is composed by the risk-free rate, equity market return and each respective beta. However, there is a fundamental complication between the risk, cost and return for the equity...

Using hand-collected data of commodity futures contracts going back to 1877, we replicate in the pre-sample history the well-documented cross-sectional commodity factor premia of momentum, value and basis. All three premia remain significantly positive in the additional 80-plus years of...

Understanding the factors that drive the stock market is more than an academic exercise. With a framework to understanding what that drives the overall market, business leaders are positioned to drive value their own businesses. While driving increases in shareholder value is one of the most...

We examined the return comovement of popular value-oriented investment strategies inside and outside equity. There are two distinct groups among the strategies that we examined. The returns of strategies within a group move together, while the returns of strategies belonging to different groups...

Equity risk premiums are a central component of every risk and return model in finance and are a key input in estimating costs of equity and capital in both corporate finance and valuation. Given their importance, it is surprising how haphazard the estimation of equity risk premiums remains in...

Value premium varies substantially across countries. We explore whether the inter-country cross-sectional variation in value premium can be predicted by those variables known to predict the intra-country time-variation in value premium. After examining data from 23 developed markets and 13...

During the global financial crisis, stressed market conditions led to skyrocketing corporate bond spreads that could not be explained by conventional modeling approaches. This paper builds on this observation and sheds light on time-variations in the relationship between systematic risk factors...

We estimate the equity risk premium by combining information from twenty models. Our main finding is that there is broad agreement across models that the equity premium reached historical heights in July 2013 even when the models are substantially different from each other and use more than one...