Intertemporal implications of the mixture-of-distributions hypothesis (MDH) are derived based on the concept of time reversibility in statistical mechanics. The restrictions are tested using simple nonparametric tests that do not impose auxiliary assumptions on the stochastic process for trading...

This study employs a new data set to re-examine the book-to-market effect. In contrast to past studies, a direct measure of expected business conditions is used to test whether the value premium is compatible with a risk-based explanation. The measure of expected business conditions is based on...

We examine the problem of time diversification from the viewpoint of prospect theory investors. We use a block bootstrap approach to generate returns of US stocks and Treasury bills for time horizons ranging from 1 year to 20 years. On average, value functions computed using these bootstrapped...

This paper applies the switching ARCH model introduced by Hamilton and Susmel (194) to weekly DM/L exchange rates for the period March 1987-December 1994. The sample period spans the UK's ERM tenure, which lasted until the currency crisis of September 1992. The SWARCH model generalized standard...

There is considerable interest as to whether exchange races behave like martingales. Liu and He (1991) test the martingale hypothesis for exchange rates using the variance ratio methodology of Lo and MacKinlay (1988). They find that exchange rates have violated martingale property since the...

The conditional volatility of crude oil futures returns is modelled as a regime switching process. The model features transition probabilities that are functions of the basis. Consistent with the theory of storage, in volatile periods, an increase in backwardation is associated with an increase...