Consider an economy in which the underlying security returns follow a linear factor model with constant coeffcients. While portfolios that invest in these securities willin general, have a linear factor structure, it will be one with time-varying coeffcients. However, under certain assumptions...

This paper presents a model in which investors cannot remain in the market to trade at all times. As a result, they have an incentive to set up trading firms or financial market intermediaries (FMI's) to take over their portfolio while they engage in other activities. Previous research has...

This paper proposes a simple back testing procedure that is shown to dramatically improve a panel data model's ability to produce out of sample forecasts. Here the procedure is used to forecast mutual fund alphas. Using monthly data with an OLS model it has been difficult to consistently predict...

This article develops a Kalman filter model to track dynamic mutual fund factor loadings. It then uses the estimates to analyze whether managers with market-timing ability can be identified ex ante. The primary findings are as follows: (i) Ordinary least squares (OLS) timing models produce false...

This paper develops a tractable, dynamic, no-arbitrage model for the pricing of bonds and stocks that are subject to default risk. The model produces the bond pricing equations of the Duffie and Singleton (1999) framework. It is then shown that a particular choice of dividend process,...

This paper develops a tractable, dynamic, arbitrage-free model capable of jointly pricing a cross section of bonds and stocks. The bond pricing portion of the model produces the standard affine term-structure equations. It is then shown that a particular choice of dividend process, characterized...