We employ the optimal orthogonal portfolio approach to investigate if the size and book-to-market effects in US data are related to risk factors beside the market risk. This method enables us to estimate the upper limit of the risk premium, due to observed as well as all possible unobserved...

This paper estimates a conditional version of the liquidity adjusted CAPM by Acharya and Pedersen (2005) using NYSE and AMEX data from 1927 to 2010 to study the illiquidity premium and its variation over time. The components of the illiquidity premium is in this model derived as the level of...

The foremost allocation problem for long-term investors is the division between stocks and bills. In this paper the investor follows a mean-variance criterion for buy-and-hold strategies. A non-parametric bootstrap approach is used to investigate if portfolio weights for stocks and bills vary in...

Time diversification continues to be a subject of intense debate within investment and academic communities. Among practitioners it not unusual to find the recommendation that an investor with a long investment horizon, should tilt the portfolio weights towards stocks. In this study, we analyze...

Little is known about the differences in the relation between risk and return in large economies such as the United States compared with smaller, less studied, markets. In this paper, Sweden serves as a representative for small open economies. The price of risk on the Swedish stock market is...

The relation between expected return and time varying risk on the Swedish stock market for the period 1977 to 1990 is examined. Using a parsimonious multivariate GARCH-M model, the conditional Sharpe - Lintner - Mossin CAPM is tested against six alternative hypotheses, including the zero-beta...

This paper estimates the conditional variance of daily Swedish OMX-index returns with stochastic volatility (SV) models and GARCH models and evaluates the in-sample performance as well as the out-of-sample forecasting ability of the models. Asymmetric as well as weekend/holiday effects are...