We relate Schumpeter's notion of creative destruction to asset pricing, thereby offering a novel explanation of size and value premia. We argue that small-value firms are more likely to be destroyed by serendipitous invention activity, and investors demand higher expected returns for bearing...

In this paper, we extend Bossaerts' (2004) analysis of the implications of the efficient learning market hypothesis (ELM) for asset prices by reformulating it in a GMM setting. Our representation is more amenable to widespread application and allows the econometrician, in testing ELM, to make...

The construction of the original HML portfolio (Fama and French, 1993) includes six seemingly innocuous decisions that could easily have been replaced with alternatives that are just as reasonable. I propose such alternatives and construct HML portfolios. In sample, the average estimate of the...

This report consists of two parts. The first part is a research note describing a comprehensive analysis of the realized return differential between small and large firms (i.e., the "size premium") in a sample of European stocks during the period between 1990 and 2018. This study establishes...

We estimate a cross-sectional model of the yield spreads of German Mittelstand bonds as a function of liquidity measures as well as a number of variables that control for both the characteristics of the issuing firm and the bond characteristics. Our results show a significant positive effect of...

The paper tests if the documented size effect in the Indian stock market is an anomaly with respect to market efficiency or an artifact with respect to data or methodology employed. The study employs two related datasets (one being held constant through the study period, the other being revised...

We find that small innovators earn higher returns than small non-innovators for up to five years. We find no such innovation premium among large firms. A battery of tests shows that this innovation premium among small firms is explained by risk. Our findings, which are based on a simple measure...

We present a new approach for estimating small business equity returns. This approach applies the Merton (1974) credit model to the returns on entrepreneurial business credit card debt securitizations and solves for the implied equity returns for the small businesses owned by the cardholders....