A five-factor model directed at capturing the size, value, profitability, and investment patterns in average stock returns performs better than the three-factor model of Fama and French (FF 1993). The five-factor model's main problem is its failure to capture the low average returns on small...

The average monthly premium of the Market return over the one-month T-Bill return is substantial, as are average premiums of value and small stocks over Market. As the return horizon increases, premium distributions become more disperse, but they move to the right (toward higher values) faster...

We use bootstrap simulations to examine the properties of long-horizon U.S. stock market returns. Distributions of continuously compounded returns converge toward normal distributions as we extend the horizon from one to 30 years, and distributions of dollar payoffs converge toward lognormal. We...

Value premiums, which we define as value portfolio returns in excess of market portfolio returns, are on average much lower in the second half of the July 1963-June 2019 period. But the high volatility of monthly premiums prevents us from rejecting the hypothesis that expected premiums are the...

A common claim is that home ownership is a good deal because the housing services it provides are untaxed. My simple point is that the property tax paid by a homeowner is in effect an annual tax on housing services. It is an income tax when the homeowner rents the house to somebody else. It's a...

Federal, state, and local governments are similar to nonprofits in that their labor inputs pay taxes, but they are otherwise tax exempt. Governments are involved in some activities special to them, for example, defense, police, and court systems, but many government activities overlap with those...

Political candidates on the left commonly propose an annual tax on wealth. There are lots of difficult questions associated with a wealth tax. For example, what counts as wealth and how is it measured? I put these important issues aside to focus on three simpler but central issues. (i) Since the...

Government does lots of redistribution along with expenditures for defense, education, etc. Government imposes income taxes to finance these activities. Income taxation can be done to raise revenue in a simple transparent way. Here's a suggested scheme

This paper analyzes the survival of organizations in which decision agents do not bear a major share of the wealth effects of their decisions. This is what the literature on large corporations calls separation of ownership and control. Such separation of decision and risk bearing functions is...

Valuation theory says that expected stock returns are related to three variables: the book-to-market equity ratio (B/M), expected profitability, and expected investment. Given B/M and expected profitability, higher rates of investment imply lower expected returns. But controlling for the other...