This paper investigates the relation between returns on stock indices and their corresponding futures contracts in order to evaluate potential explanations for the pervasive yet anomalous evidence of positive, short-horizon portfolio autocorrelations. Using a simple theoretical framework, we...

This paper presents a general, nonlinear version of existing multifactor models, such as Longstaff and Schwartz (1992). The novel aspect of our approach is that rather than choosing the model parameterization out of quot;thin air,quot; our processes are generated from the data using...

The hybrid approach combines the two most popular approach to VaR estimation: RiskMetrics and Historical Simulation. It estimates the VaR of a portfolio by applying exponentially declining weights to past returns and then finding the appropriate percentile of this time-weighted empirical...

We investigate the empirical implications of using various measures of payout yield rather than dividend yield for asset pricing models. We find statistically and economically significant predictability in the time series when payout (dividends plus repurchases) and net payout (dividends plus...

The prevailing view in finance is that the evidence for long-horizon stock return predictability is significantly stronger than that for short horizons. We show that for persistent regressors, a characteristic of most of the predictive variables used in the literature, the estimators are almost...

Long-horizon return regressions have effectively small sample sizes. Using overlapping long-horizon returns provides only marginal benefit. Adjustments for overlapping observations have greatly overstated t-statistics. The evidence from regressions at multiple horizons is often misinterpreted....

We explore optimal currency exposures in international equity portfolios through the lens of a modified mean-variance optimization framework. We decompose the optimal currency portfolio into a “hedge portfolio” which minimizes equity volatility using a dynamic risk model and an “alpha...

While there is significant interest in investing in Brady bonds, the source of attraction is often the exposure to sovereign risk (and its yield compensation), while the exposure to U.S. interest rate risk is a quot;necessary evilquot;. This paper addresses the problem of determining the...

This article develops a new approach for hedging mortgage- backed securities (MBS) that involves estimating the joint distribution returns on MBS and T-note futures, conditional on economic conditions. The resulting hedge ratio is calculated by differentially weighting past pairs of MBS and...

Data on the portfolio weights of asset allocators allows us to address the following two questions: (i) can market timers time markets? and, if so, (ii) can they predict returns over and above predetermined predictive economic variables? A priori, if no evidence of market timing ability can be...