We propose several multivariate variance ratio statistics. We derive the asymptotic distribution of the statistics and scalar functions thereof under the null hypothesis that returns are unpredictable after a constant mean adjustment (i.e., under the weak form Efficient Market Hypothesis). We do...

Using a simple model of equity valuation, we de fine stock market bubbles and anti-bubbles as periods in which the dynamics of valuation is temporarily explosive. We identify a mechanism for the creation and destruction of bubbles and anti-bubbles that depends on the interaction between...

In this paper, we develop and examine a simple interactive agent‐based model, where the distribution of returns generated from the model takes into account two stylized facts about financial markets： fat tails and volatility clustering. Our results indicate that the risk tolerance of...

This study shows that fitting errors of equity-option-implied volatility surfaces are informative about intermediary frictions. For each stock and day, we quantify the goodness of fit between the observed implied volatilities of all available options and the corresponding estimates from...

We investigate the dynamics of prices, information and expectations in a competitive, noisy, dynamic asset pricing equilibrium model. We show that prices are farther away from (closer to) fundamentals compared with average expectations if and only if traders over- (under-) rely on public...

The Fama-French factors are ubiquitous in empirical finance, industry, and law. We find that factor returns differ substantially depending on when the data were downloaded. The effects of these retroactive changes are large. Holding the sample period constant and varying only factor vintages, we...

We examine the cross-sectional determinants of individual investors´ noise trading activity based on their respective Big Five personality traits. Our unique data set is obtained by a self-reported questionnaire that includes responses of 2,147 individual investors who actively engage in...

This paper proposes a novel measure of noise trading that aims to capture uninformed retail trading. The measure, an indicator of whether the firm placed advertisement(s) in the Wall Street Journal seven calendar days earlier, is motivated by evidence that retail trading spikes seven days after...

Contributing to the debate on the nominal price puzzle, we show that higher stock price level is associated with lower noise trading level which confirms Black's (1986) conjectures that noise traders prefer low-priced stocks to high-priced stocks. The result is robust after controlling for...

The existence of the pricing kernel is shown to imply the existence of an ambient information process that generates market filtration. This information process consists of a signal component concerning the value of the random variable X that might be interpreted as the timing of future cash...