In this paper, we explore an alternative explanation of the exposure puzzle, the missing variable bias in previous studies. We propose to correct the bias with the quantile regression technique invented by Koenker and Bassett (Econometrica 46:33–51, <CitationRef CitationID="CR30">1978</CitationRef>). Empirically, as soon as we take into...</citationref>

Financial market information can provide an objective assessment of losses anticipated from global warming. In a Merton-type asset pricing model, with asset prices affected by perceived changes in investment opportunities due to global warming, the risk premium is significantly negative and...

Momentum strategies usually do not produce significant profits in emerging stock markets. Chui, Titman, and Wei [Chui, A. C. W., Titman, S., & Wei, K. C. J. (2000). Momentum, legal systems and ownership structure: An analysis of Asian stock markets. Working paper, Hong Kong Polytechnic...

Motivated by Berk and Green [Berk, J., & Green, R. (2004). Mutual fund flows and performance in rational markets. Journal of Political Economy, 112, 1269-1295] and Chevalier and Ellison [Chevalier, J., & Ellison, G. (1999). Career concerns of mutual fund managers. Quarterly Journal of Economics,...

Purpose – The purpose of this paper is to re-examine the sources of momentum profits by focusing on momentum in monthly returns. Design/methodology/approach – The paper utilizes a decomposition method proposed by Du and Watkins. Findings – Different from previous studies, it is found that...

We first provide a cleaner and comprehensive out-of-sample test of three competing asset-pricing models. Our results suggest that the value and momentum factors have pervasive pricing power. Motivated by Garlappi and Yan (2011), we then examine if there is a unifying risk-based explanation for...

We hypothesize that persistent exchange-rate movements are a distress risk and a state variable in the Merton (1973) sense. To test our hypothesis, we use the tracking portfolio approach of Lamont (2001) to capture news about future persistent exchange-rate movements. We find empirical evidence...