This paper investigates how investor sentiment affects stock market returns and evaluates the predictability power of sentiment indices on U.S. and EU stock market returns. As regards the American example, evidence shows that investor sentiment indices have an economic and statistical...

This paper investigates how investor sentiment affects stock market returns and evaluates the predictability power of sentiment indices on U.S. and EU stock market returns. As regards the American example, evidence shows that investor sentiment indices have an economic and statistical...

In this paper, we conduct a comprehensive study of tests for mean-variance spanning. Under the regression framework of Huberman and Kandel (1987), we provide geometric interpretations not only for the popular likelihood ratio test, but also for two new spanning tests based on the Wald and...

We develop a simple parametric model in which hypotheses about predictability, mispricing, and the risk-return tradeoff can be evaluated simultaneously, while allowing for time variation in both risk and expected return. Most of the return predictability based on aggregate payout yield is...

We propose a new approach to imposing economic constraints on time series forecasts of the equity premium. Economic constraints are used to modify the posterior distribution of the parameters of the predictive return regression in a way that better allows the model to learn from the data. We...

Is it theoretically legitimate for an investor to attempt to outperform the market index? Or is the investor simply deluding himself? The purpose of this paper is to apply the new Theory of Rational Beliefs (RB) to demonstrate the following result: Even when all agents have symmetric...

The Black-Litterman (BL) model has been proposed as an alternative to Markowitz's average-variance model for the structuring of financial asset portfolios, allowing the incorporation of perspectives of fundamental analysts and guaranteeing a high degree of diversification. This model is applied...

This paper examines the long-term dependence between the Polish and German stock markets in terms of industry beta risk estimates according to the Capital Asset Pricing Model (CAPM). The main objective of this research is to compare the Polish and German beta parameters of five Polish and three...

The Black-Litterman (BL) model has been proposed as an alternative to Markowitz's average-variance model for the structuring of financial asset portfolios, allowing the incorporation of perspectives of fundamental analysts and guaranteeing a high degree of diversification. This model is applied...