Basic asset pricing theory predicts high expected returns are a compensation for risk. However, high expected returns might also represent an anomaly due to frictions or behavioral biases. We propose two complementary, simple-to-use tests to assess whether risk can explain differences in...

Basic asset pricing theory predicts high expected returns are a compensation for risk. However, high expected returns might also constitute anomalies due to frictions or behavioral biases. We propose two complementary simple-to-use tests to assess whether risk can explain differences in expected...

In economics and finance, test statistics and confidence regions are typically probabilistically dependent on previously-used data. However, the Bayesian and classical justifications for usual tests and confidence regions are known to be invalid in this case. Given the success of empirical...

Moment-based estimation often yields instable estimates, such as the RRA (relative risk aversion) estimate in consumption-based asset pricing. This paper establishes novel theoretical results for the ESP (empirical saddlepoint) approximation, and then use them to investigate this instability. We...

In empirical economics and finance, inference is often based on previously-used data. We show that valid Bayesian inference is noninformative for previously-used data. Given the prevalence of previously-used data and the success of ``Bayesian" methods in empirical economics and finance, this is...