We first show that liquidity, as measured by stock turnover or trading volume, is an economically significant investment style that is distinct from traditional investment styles such as size, value/growth, and momentum. We then introduce and examine the performance of several portfolio...

We present comprehensive evidence in support of giving liquidity equal standing to size, value/growth, and momentum as investment styles, as defined by Sharpe (1992). First, we show that financial market liquidity, as identified by stock turnover, is an economically significant indicator of...

This paper demonstrates that rational momentum can exist in an economy where autocorrelated risk and convex dividend policies are present. It then studies the momentum role of firms. When a firm actively creates positive productivity shocks and accordingly increases its production scale, its...

This paper first demonstrates that, in a discrete time framework, rational momentum can exist in an economy that has autocorrelated risk and convex dividend policies. It then uses this framework to examine the momentum role of firms. When firms actively create positive productivity shocks and...

This paper examines the information embedded in both the stock and option markets prior to takeover announcements. During normal periods, buyer-seller initiated stock volume imbalances are significant predictors of next-day stock returns and option volume imbalances are uninformative. However,...

This article empirically analyzes some properties shared by all one-dimensional diffusion option models. Using Samp;P 500 options, we find that when sampled intraday (or inter-day), (i) call (put) prices often go down (up) even as the underlying price goes up, and (ii) call and put prices often...

This paper studies the equilibrium valuation of foreign exchange-contingent claims. The basic framework is the continuous-time counterpart of the classic Lucas (1982) two-country model, in which exchange rates, term structures of interest rates and, in particular, factor risk prices are all...

Recent empirical studies find that once an option pricing model has incorporated stochastic volatility, allowing interest rates to be stochastic does not improve pricing or hedging any further while adding random jumps to the modeling framework only helps the pricing of extremely short-term...