Methods of inference based on a unit root assumption in the data are typically not robust to even small deviations from this assumption. In this paper, we propose robust procedures for a residual-based test of cointegration when the data are generated by a near unit root process. A Bonferroni...

At long horizons, multiplicative compounding induces strong-to-extreme positive skewness into stock returns; the magnitude of the effect is primarily determined by single-period volatility. Consequently, at horizons greater than five years, returns --individual or portfolio-- will be positively...

We investigate the properties of Johansen''s (1988, 1991) maximum eigenvalue and trace tests for cointegration under the empirically relevant situation of near-integrated variables. Using Monte Carlo techniques, we show that in a system with near-integrated variables, the probability of reaching...

I study long-short portfolio strategies formed on seven different stock characteristics representing various measures of past returns, value, and size. Each individual characteristic results in a profitable portfolio strategy, but these single-characteristic strategies are all dominated by a...

We study empirical mean-variance optimization when the portfolio weights are restricted to be direct functions of underlying stock characteristics such as value and momentum. The closed-form solution to the portfolio weights estimator shows that the portfolio problem in this case reduces to a...

Expectations about future housing prices are arguably an important determinant of actual housing prices, and an important input in decisions on whether and how to transact in the housing market. Using novel micro-level survey data on Swedish households, we analyse households' expectations of...

Survey data indicate that a relatively large share of households is ill-informed about the rate of inflation in the economy, with perceived and expected rates of inflation deviating substantially from official measures. Using Swedish micro-level data, we find that such inflation illiteracy is...

Household expectations of future mortgage rates elicited over the last few years might appear unrealistically low. However, taking explicit account of the high persistence in interest rates, we find that Swedish households' implied long-term expectation of mortgage rates is around 4.7 percent....