We combine two approaches to the pricing kernel, one empirical and one theoretical, which relax the restriction that the objective return distribution and risk neutral distribution share the same volatility and higher order moments. The empirical approach provides estimates for the evolution of...

A new economic revolution liberating financial markets? Seeks to answer some of the questions driving the existential crisis embroiling finance: What is currency? What is value? What is a business? What is a bank, even?This article discusses how regulatory reform, transformative technologies,...

We estimate the profitability of global index-level trading strategies formed on daily weather conditions across 49 countries. We use pre-market weather conditions (sunshine, wind, rain, snow, and temperature) and the statistical relationship between weather and returns to predict index returns...

Many financial instruments are designed with embedded leverage such as options and leveraged exchange traded funds (ETFs). Embedded leverage alleviates investors' leverage constraints and, therefore, we hypothesize that embedded leverage lowers required returns. Consistent with this hypothesis,...

We study the effect of political corruption on household financial well-being using microdata from the United States and China. Our identification strategy exploits recent anti-corruption campaigns in China as exogenous shocks to the perceived level of corruption held by individuals. Households...

Theory has linked price momentum with price reversals (Barberis, Shleifer, and Vishny (1998), Daniel, Hirshleifer, and Subrahmanyam (1998), and Hong and Stein (1999)). The models generally rely on behavioral descriptions of irrational investors who push prices beyond their fundamental value thus...

We examine time discounting factors in an international survey. Our analysis reveals a significant relationship between time discount factors and historical equity premiums across 27 countries. This result implies that higher historical equity risk premiums are observed in countries where survey...

We elicit time discounting factors in an international survey. Our analysis reveals a significant relationship between time discount factors and historical equity premium across 27 countries. It implies that in countries where participants tend to be more short-term oriented, higher historical...

Hypothetical stock market investment experiment in six countries reveals that after controlling for the average profit in the whole stock market subjects prefer losing money rather than gaining money as long as their so-called "friends" lose more money. The sad result is that only 8.2% of the...

Using a simple sign test, we report new empirical evidence, taken from both the US and the German stock markets, showing that trading behavior substantially changed around Black Monday in 1987. It turned out that before Black Monday investors behaved more as in the momentum strategy; and after...