Capitalisation weighting has added 8,000 basis points of incremental returns to the FTSE 100 Index compared to an equally weighted portfolio of the same constituents. Industry factors explained 66% of the incremental returns, while size and style factors explained 2%. The capitalisation weighted...

Many people find the mean-variance assumption of the CAPM hard to justify. This paper replaces the mean-variance assumption with a weaker assumption based on the class of consistent risk measures. This class of risk measures is chosen because there is a weak form of equivalence between the mean...

The nature of the value premium is subject of academic debate for several decades now. It has been suggested that the value premium is associated with investor pessimism. Doukas et al. (2002) have rejected this suggestion, and found that financial analysts are even more optimisms for value...

In this study, we construct a corporate governance index based on several attributes known for their association with firm profitability and market value. The index is used for evaluating the performance of governance-sorted portfolios. We find that the portfolio of well-governed firms...

This paper examines the stochastic dominance efficiency in the presence of transaction costs for Samp;P 500 index futures call and put options by estimating bounds on reservation write and reservation purchase prices and then verifying whether the observed option prices satisfy them. The bounds...

This paper establishes a robust link between momentum and credit rating. Momentum profitability is large and significant among low-grade firms, but it is nonexistent among high-grade firms. The momentum payoffs documented in the literature are generated by low-grade firms that account for less...

We investigate the relations between changes in the precisions of public and private information and changes in market liquidity around earnings announcements. Increases in the precision of public information reduce information asymmetry, whereas increases in the precision of private information...

This paper provides new evidence on the empirical success of structural models in explaining corporate credit risk changes. A parsimonious set of common factors and firm-level fundamentals, inspired by structural models, explains more than 54% (67%) of the variation in credit spread changes for...

We analyze the results of the most recent survey of U.S. Chief Financial Officers (CFOs) which looks ahead to the first quarter of 2006 and beyond. We present expectations of the equity risk premium measured over a 10-year horizon relative to a 10-year U.S. Treasury bond. This multi-year survey...

We test the mean-variance efficiency of a given portfolio with a Bayesian framework. Our test is more direct than Shanken's (1987), because we impose a prior on all the parameters of the multivariate regression model. The approach is also easily adapted to other problems. We use Monte Carlo...