Disposition effect is the tendency of investors to ride losses and lock in gains. Capital gains overhang is a quantity used in prior literature to construct hypothesis tests for the existence of the disposition effect using publicly available stock market data. This quantity estimates the...

Across numerous asset classes, momentum strategies have historically generated high Sharpe ratios and strong positive alphas relative to standard asset pricing models. However, the returns to momentum strategies are negatively skewed: they experience infrequent but strong and persistent strings...

This paper sheds new light on the mutual relationship between investor sentiment and excess returns corresponding to the bubble component of stock prices. We propose to use the wavelet concept of the phase angle to determine the lead-lag relation between these variables. The wavelet phase angle...

We document a highly significant, strongly nonlinear dependence of stock and bond returns on past equity market volatility as measured by the VIX. We propose a new estimator for the shape of the nonlinear forecasting relationship that exploits additional variation in the cross section of...

Stocks that hedge against sustained market downturns — periods from peak to trough in S&P500 levels at the business cycle frequency — should have low expected returns, but they do not. We use ex-ante firm characteristics and covariances to construct a tradeable Safe Minus Risky (SMR)...

Momentum is one of the largest and most pervasive market anomalies. However, despite a high mean and Sharpe ratio, momentum suffers from large negative skewness that comes from momentum crash periods. These crashes occur in times of both market stress and market rebound and thus variables that...