We introduce a novel composite probability distortion (CPD) score based on investors’ stock valuations derived from a pure-probability-weighting version of cumulative prospect theory and from salience theory. This measure is strongly and consistently priced in the cross-section of...

We conduct a comprehensive comparison of market beta estimation techniques. We study the performance of several historical, time-series model, and option implied estimators for estimating realized market beta. Thereby, we find the hybrid methodology of Buss and Vilkov (2012) to consistently...

In this study, we comprehensively examine the volatility term structures in commodity markets. We model state-dependent spillovers in principal components (PCs) of the volatility term structures of different commodities, as well as that of the equity market. We detect strong economic links and a...

Which factor model do investors in corporate bonds use? We examine this question by tracking investors' decisions to invest in actively managed corporate bond mutual funds with a revealed preference approach. Our main result is that all bond factor models are dominated by the simple Sharpe...

In recent years, commodity markets have become increasingly popular among financial investors. In contrast to traditional markets such as equities or bonds for which many studies have identified various profitable investment strategies, less is known for commodity markets. In this paper, we...

This paper examines the estimation of global and local betas for a large set of Developed and Emerging international markets. Estimators based on daily data clearly outperform those based on monthly or quarterly data. For global and local market betas, the optimal window length is at roughly 24...

Researchers and practitioners employ a variety of time-series processes to forecast betas, using either short-memory models or implicitly imposing infinite memory. We find that both approaches are inadequate: beta factors show consistent long-memory properties. For the vast majority of stocks,...

Researchers and practitioners employ a variety of time-series processes to forecast betas, using either short-memory models or implicitly imposing infinite memory. We find that both approaches are inadequate: beta factors show consistent long-memory properties. For the vast majority of stocks,...