We investigate the relation between downside beta and stock returns in a global context using more than 170 million daily return observations. Contrary to the findings in the U.S. equity market, we show that downside beta does not explain the cross-sectional differences in future and...

We provide empirical evidence that the returns on US equity momentum exhibit a time-varying skewness which deepens during dramatic losses (crashes). As a result, the dynamics of the strategy expected returns reflects the time variation in both conditional volatility and skewness. This has first...

Returns merely based on one purchasing price of an asset are uninformative for people regularly contributing to their old-age provision. Here, each purchase has an influence on the outcome. Still, they are commonly used in finance literature, giving an overly optimistic view of expected...

Purpose: People often face constraints such as a lack of time or information in taking decisions, which leads them to use heuristics. In these situations, fast and frugal rules may be useful for making adaptive decisions with fewer resources, even if it leads to suboptimal choices. When applied...

Investment in the financial markets is guided by the trade-off between expected returns and risk appetite of the investor. Higher risks could possibly result in higher expected return on the upside risk but the possibility of massive downside risk of loss must never escape the investor. The...

In this paper we study a simple two-period asset pricing model to understand the implications of uninsurable labor income risk and/or borrowing constraints, limited stock market participation, heterogeneous labor income volatilities, and heterogeneous preferences. We appraise the performance of...

Academic criticism of classic Capital Asset Pricing Model (CAPM) performance measures is not new. In particular, a number of authors have pointed out the shortcomings of using the Sharpe ratio for performance evaluation and the mean-variance framework for portfolio construction when the...

I propose a turnover-adjusted momentum strategy and argue that it is more profitable and stable compared to the momentum strategy proposed by Jegadeesh and Titman (1993). Stocks are sorted by the moving standard deviation of the product of "share turnover ratio" and "returns without dividends"...

Frazzini and Pedersen (2014) document that a betting against beta strategy that takes long positions in low-beta stocks and short positions in high-beta stocks generates a large abnormal return of 6.6% per year and they attribute this phenomenon to funding liquidity risk. We demonstrate that...

Ability to estimate an individual security returns is very important and needed by investors. Therefore the presence of Capital Asset Pricing Model (CAPM) which can be used to estimate the return of a security is considered very important in the field of finance. However, Fama and French showed...