This paper is based on the premise that knowledge about the alphas of one set of funds will influence an investor's beliefs about other funds. This will be true insofar as an investor's expectation about the performance of a fund is partly a belief about the abilities of mutual fund managers as...

Baba, Hendry and Starr (1992) attempt to restore a stable specification for the demand for M1 balances in the United States. Estimating an error correction model that simultaneously models the long-run and short-run determinants of money demand, they introduce two new explanatory factors of the...

Most affine models of the term structure with stochastic volatility (SV) predict that the variance of the short rate is simultaneously a linear combination of yields and the quadratic variation of the spot rate. However, we find empirically that the A1(3) SV model generates a time series for the...

A commonly held view in the financial and economic literature is that quot;free cash flow is badquot; in the sense that, given the opportunity, shareholders would always choose to minimize its existence. This view of the world has motivated economists such as Jensen (1988, 1993) to conclude that...

We show that the average difference between the implied volatilities of call and put options on individual equities, which we term the implied volatility spread (IVS), has strong predictive power for stock market returns at horizons between one and six months, with monthly in-sample and...

This study confronts the growing evidence that multiple sources of priced risk appear necessary to explain the expected returns of equity index options. A general class of nonlinear latent factor models is estimated using a data set of over 32,000 daily return observations on Samp;P 500 index...

This paper investigates the asset pricing and macroeconomic implications of the ratio of new orders (NO) to shipments (S) of durable goods. NO/S is a measure of investment commitments by firms, and high values of NO/S are associated with a business cycle peak. High NO/S predicts a short-run...

We argue that anomalies may experience prolonged decay after discovery and propose a Bayesian framework to study how that impacts portfolio decisions. Using the January effect and short-term index autocorrelations as examples of disappearing anomalies, we find that prolonged decay is empirically...

We examine the relation between inventory investment and the cost of capital in the time series and the cross section. We find consistent evidence that risk premia, rather than real interest rates, are strongly negatively related to future inventory growth at the aggregate, industry, and firm...