Using a large sample of nonfinancial firms from 47 countries, we examine the effect of derivative use on firm risk and value. We control for endogeneity by matching users and nonusers on the basis of their propensity to use derivatives. We also use a new technique to estimate the effect of...

This article characterizes the stochastic behavior of expected retu rns on common stocks. The authors assume market efficiency and postulate an autoregressive process for conditional expected returns. They use weekly returns of ten size-based portfolios over the 1962-8 5 period and find that (1)...