Tests of asset-pricing models are developed that allow expected risk premiums and market betas to vary over time. These tests exploit the relation between expected excess returns and current market values. Using weekly data for 1963-82 on ten common stock portfolios formed according to equity...

Sample evidence about the predictability of monthly stock returns is considered from the perspective of a risk-averse Bayesian investor who must allocate funds between stocks and cash. The investor uses the sample evidence to update prior beliefs about the parameters in a regression of stock...

The authors develop a method of measuring ex ante real interest rates using prices of index and nominal bonds. Employing this method and newly available data, they directly test the Fisher hypothesis that the real rate of interest is independent of inflation expectations. The authors find a...

The authors propose a likelihood- ratio test of the hypothesis that the minimum-variance frontier of a set of K assets coincides with the frontier of this set and another s et of N assets. They study the relation between this hypothesis, exac t arbitrage pricing, and mutual-fund separation. The...

Cochrane’s variance ratio is a leading tool for detection of deviations from random walks in financial asset prices. This Paper develops a variance ratio related regression model that can be used for prediction. We suggest a comprehensive framework for our model, including model...

This paper studies the relation between Value Line's successful record in predicting relative stock-price movements and the firm size effect. The data suggest little direct relation between the two phen omena. Value Line tends not to rank small-firm stocks, and small-firm stocks that are ranked...

Bayesian posterior distributions allow one to investigate the approximate efficiency of a portfolio without specifying the maximum degree of inefficiency a priori. The difference in expected returns between the value-weighted equity portfolio and an efficient portfolio of equal variance has a...

An equilibrium pricing model with time-varying conditional moments of consumption growth is used to analyze the behavior of conditional moments of stock returns for long and short investment horizons. We examine the behavior over time of estimates of the conditional means and variances of...

We develop a method of measuring ex-ante real interest rate using prices of index and nominal bonds. Employing this method and newly available data, we directly test the Fisher hypothesis that the real rate of interest is independent of inflation expectations. We find a negative correlation...