I provide a risk-based rational explanation for the seasonal regularity of January in stock returns by suggesting a common risk factor related to the information uncertainty caused by earnings volatility. When the two-factor model with the market risk factor and this common risk factor is used,...

This paper examines the effect of commercial bank entry on underwriting spreads for IPOs, SEOs, and debt issues using a long time series that spans 30 years, from 1975 to 2004. We find that, on average, commercial banks charge lower spreads of approximately 72 basis points for IPOs, 43 basis...

This paper reexamines the explanatory power of beta, firm size, book-to-market equity, and the earnings-price ratio for average stock returns, correcting two currently controversial biases: selection bias in COMPUSTAT and the errors-in-variables (EIV) bias. After filling in the missing data on...

Margin requirements in metal futures contracts have a negative impact on market participation that seems causal because it is absent from a benchmark group of metals that do not undergo similar margin changes. It is less clear whether margins restrict primarily rational or irrational investors....

To explain post-earnings announcement drift, we construct a risk factor related to unexpected earnings surprise, and propose a four-factor model by adding this risk factor to Fama and French's (1993), (1995) three-factor model. This earnings surprise risk factor provides a remarkable improvement...

This paper analytically and empirically investigates the sensitivity of the return measurement interval to the market beta estimate and suggests a market beta estimation method incorporating the investment horizon through a vector autoregressive (VAR) model when there is serial correlation in...

This paper provides a Bayesian test of parameter non stationarity and an estimation procedure for the detection of change points in the time series of stock returns. The empirical results indicate that this procedure can identify the change points in the data without prior knowledge and provide...

This paper evaluates and compares asset pricing models in the Korean stock market. The asset pricing models considered are the CAPM, APT-motivated models, the Consumption-based CAPM, Intertemporal CAPM-motivated models, and the Jagannathan and Wang conditional CAPM model. By using various test...