This paper investigates the market pricing of subprime mortgage risk on the basis of data for the ABX.HE family of indices, which have become a key barometer of mortgage market conditions during the recent financial crisis. After an introduction into ABX index mechanics and a discussion of...

This paper documents a new channel for rating-based bond market segmentation which, in contrast to prior research, is based on non-regulatory asset management practices. A 2005 Lehman Brothers index redefinition provides a quasi-natural experiment in which a number of previously high-yield...

We find that the firms included in the S&P 500 index are characterized by large increases in earnings, appreciation in market value, and positive price momentum in the period preceding their index inclusion. This strong preinclusion performance predicts 1) the permanent increase in market value...

This paper investigates how the introduction of an index security directly or indirectly impacts the underlying-index spot-futures pricing. Using intraday data for financial instruments related to the CAC 40 index, we do not find that the spot-futures price efficiency improvement observed after...

Perold (2007) shows that, given a diffuse prior that is being updated in light of a noisy market price, the posterior distribution says that value-weighting and equal-weighting one's portfolio makes no difference. We argue that the diffuse prior is hard to reconcile with reality and that a...

Several recent papers present models to explain the probability and timing of seasoned equity offerings. Using a unique database of Australian new economy companies, we find no single model is adequate. The variables that are important in determining the probability of an SEO provide only...

This paper examines the interaction between short-run return reversals, momentum and idiosyncratic volatility in the Australian market. We confirm that stocks with high idiosyncratic volatility earn low average returns over the next month. Unlike US studies which attribute this negative relation...

We explore the negative relation between idiosyncratic volatility and future stock returns observed by previous researchers. We argue that, based on the observation described in prospect theory, retail investors prefer stocks with a high level of idiosyncratic volatility and are subsequently...