type="main" <title type="main">ABSTRACT</title> <p>We connect stocks through their common active mutual fund owners. We show that the degree of shared ownership forecasts cross-sectional variation in return correlation, controlling for exposure to systematic return factors, style and sector similarity, and many other pair...</p>

We propose a novel measure of arbitrage activity to examine whether arbitrageurs can have a destabilizing e¤ect in the stock market. We apply our insight to stock price mo- mentum, a classic example of an unanchored strategy that exhibits positive feedback since arbitrageurs buy stocks when...

The cash flows of growth stocks are particularly sensitive to temporary movements in aggregate stock prices, driven by shocks to market discount rates, while the cash flows of value stocks are particularly sensitive to permanent movements, driven by shocks to aggregate cash flows. Thus, the high...

This paper extends the approximate closed-form intertemporal capital asset pricing model of Campbell (1993) to allow for stochastic volatility. The return on the aggregate stock market is modeled as one element of a vector autoregressive (VAR) system, and the volatility of all shocks to the VAR...

We show that the stock market downturns of 2000–2002 and 2007–2009 have very different proximate causes. The early 2000s saw a large increase in the discount rates applied to profits by rational investors, while the late 2000s saw a decrease in rational expectations of future...

Recent studies find evidence in favour of return predictability, and argue that their positive findings result from their ability to capture expected returns. We assess the forecasting performance of two popular approaches to estimating expected equity returns, a dividend discount model (DDM)...