In this article, we posit an empirical beta pricing model of expected commodity futures returns to explore predictable variation in their returns. Our model allows commodity futures returns to vary with the holdings of hedgers and allows these holdings to vary with business conditions. The model...

Recent empirical studies use the returns of attribute-sorted portfolios of common stocks as if they represent risk factors in an asset pricing model. If the attributes are chosen following an empirically observed relation to the cross-section of stock returns, such portfolios will appear to be...

This paper examines time-series forecast errors of expected returns from conditional and unconditional asset pricing models for portfolio and individual firm equity returns. A new result concerning model specification and forecasting that increases predictive precision is introduced. Conditional...

Prior empirical evidence on the stock price response of exposed firms to contemporaneous changes in exchange rates is weak. This paper avoids many problems encountered in previous work by using event-study methods to examine the daily stock price reactions of exposed U.S. multinationals to...

Depending on their location, outliers in returns can substantially bias ordinary least-squares estimates of beta. We introduce a new beta estimate that is resistant to outliers that cause the most bias in OLS estimates but produces estimates similar to OLS for outlier-free data. The...

We document significantly increased reliance on off-balance-sheet (OBS) lease financing that is inconsistent with economic theory. Specifically, the increase is greatest among non-distressed firms characterized by growth options and high R&D but without obvious tax incentives. We explore...

This paper studies the estimation of asset pricing model regressions with conditional alphas and betas, focusing on the joint effects of data snooping and spurious regression. We find that the regressions are reasonably well specified for conditional betas, even in settings where simple...

Even though stock returns are not highly autocorrelated, there is a spurious regression bias in predictive regressions for stock returns related to the classic studies of Yule (1926) and Granger and Newbold (1974). Data mining for predictor variables interacts with spurious regression bias. The...

We test the hypothesis that financial institutions and other regulated institutional investors benefit from relatively uninformative credit ratings. Using credit ratings without regulatory implications as a benchmark, we show that Moody's certifies riskier bonds as investment grade. This...

There is a significant negative relationship between stock returns and changes in future stock return volatility even among all-equity firms. While Hasanhodzic and Lo (2011) suggest that the inverse price and variance relation cannot be due to the classic leverage effect, our results suggest...