This paper analyzes the implications of short-termism on portfolio decisions of investors, and its potential consequences on green investments. We study a dynamic portfolio choice problem that contains two assets, one asset with fluctuating returns and another asset with a constant risk-free...

We study the disagreement of foreign exchange (FX) dealers using proprietary survey data on dealers' price quotes of short- and long-tenor currency derivatives. Dispersion among dealers is the highest at short tenors, where heterogeneous information is of great relevance, and is much lower at...

We make a case that characteristics-based long-short factors should be constructed by the slope factor method rather than by sorting methods. This is because sorting does not fully control for the influence of omitted characteristics, rendering them more noisy than slope factors. In contrast,...

Purpose - We propose a risk factor for idiosyncratic entropy and explore the relationship between this factor and expected stock returns. Design/methodology/approach - We estimate a cross-sectional model of expected entropy that uses several common risk factors to predict idiosyncratic entropy....

The rate of capital gains of the market portfolio is vastly more volatile than the dividend yield. As a result, standard CAPM betas capture exposure only to market capital gains. We propose a two-factor CAPM that includes a separate market dividend yield factor and find that this factor carries...

We introduce a new discounted cash flow model which integrates the diversification effect of multi-business firms. We face two challenges. One is examining how different degrees of diversification can affect firm value due to risk reduction, and the other is modeling segment-specific cash flows...

We study a dynamic contracting problem in continuous-time dynamically complete market general equilibrium, whereby an investor must delegate all his portfolio choice problems to a manager. This framework is one of the first attempts to attack a combined dynamic contracting and dynamic asset...

We present a general equilibrium model in which heterogeneous investors choose among bonds, stocks, and an Index Fund holding the market portfolio. We show that, under standard assumptions, an equilibrium exists. We then derive predictions for equilibrium asset prices, investor behavior, and...

We analyze an environment where the uncertainty in the equity market return and its volatility are both stochastic and may be potentially disconnected. We solve a representative investor's optimal asset allocation and derive the resulting conditional equity premium and risk-free rate in...

This paper proposes a dynamic information diffusion model that explains the lead-lag reaction of stock prices resulting from the interaction of price trends and implied price risk (IPR). Consistent with our model's predictions, we construct a zero investment underreaction portfolio (overreaction...