In 1982, Dimensional Fund Advisors launched a mutual fund intended to capture the returns of small-cap stocks comprising the 9th and 10th deciles of NYSE market capitalization. Although linked to the CRSP 9-10 Index, the design of the 9-10 Fund incorporates investment rules and a trading...

In many industries there are firms whose owners are also customers. They have contrasting interests: they get more utility as the firm's profits increase, and the prices of the good decreases as their private consumer surplus increases. An interesting example is the stock exchange industry. This...

Evidence of structural breaks in the historical return distribution raises concerns about averaging a long series to estimate the current equity premium. Data before a break are relevant if one believes that large shifts in the premium are unlikely or that the premium is associated, to some...

Costs of equity for individual firms are estimated in a Bayesian analysis framework using several factor-based pricing models. Substantial prior uncertainty about mispricing often produces an estimated cost of equity close to that obtained with mispricing precluded, even for a stock whoses...

Implications of factor-based asset pricing models for estimation of expecte d returns and for portfolio selection are investigated. In the presence of model mispricing due to a missing factor, the mispricing and the residual covariance matrix are linked together. Imposing a strong form of this...