We summarize some of our own past findings and place them in the context of the historical development of the idea of the equity risk premium and its empirical measurement by financial economists. In particular, we focus on how the theory of compensation for investment risk developed in the 20th...

We use a panel of more than 100,000 investor accounts in US stocks over the period 1991-1995 to construct an investor-based measure of dispersion of opinion, unlike the analyst based measure used in the literature. We use this measure to test two competing hypotheses: the sidelined investors...

Many scholars have asked whether British investors benefited from overseas investment investing in the 19th century and whether this export of capital had negative effects. We re-visit the issue using modern portfolio theory. We examine the set of investment opportunities available to British...

Behavioral economics has played a fundamental role historically in innovation in economic institutions, even long before behavioral economics was recognized as a discipline. Examples from history, notably that of the invention of workers' compensation, illustrate this point. Though scholarly...

This paper proposes a simple back testing procedure that is shown to dramatically improve a panel data model's ability to produce out of sample forecasts. Here the procedure is used to forecast mutual fund alphas. Using monthly data with an OLS model it has been difficult to consistently predict...

In this paper, we focus on two issues. First, we analyze the potential biases in reported hedge fund returns, in particular survivorship bias and backfill bias, and attempt to create an unbiased return sample. Second, we decompose these returns into their three A,B,C components: the value added...

This paper studies the role of transfers among groups within a country as well as among countries in a two level game of international trade negotiations. We show that in order to realize the intended transfer in the presence of asymmetric information on the states of recipients (and donors), a...

This paper considers the impact of takeover (or acquisition) likelihood on firm valuation. If firms are more likely to acquire during times when they have free cash and/or when the required rate of return is low, takeover targets become more sensitive to shocks to aggregate cash flows and/or to...

The life-cycle accounts proposal for Social Security reform has been justified by its proponents using a number of different arguments, but these arguments generally involve the assumption of a high likelihood of good returns on the accounts. A simulation is undertaken to estimate the...

The present paper introduces new sign tests for testing for conditionally symmetric martingale-difference assumptions as well as for testing that conditional distributions of two (arbitrary) martingale-difference sequences are the same. Our analysis is based on the results that demonstrate that...