The focus of this study is the effect that portfolio composition has on the tracking performance of indexed portfolios. Indexed portfolios from high-capitalization indices are shown to have a lower tracking error and standard deviation of tracking error than indexed portfolios from...

There has been much interest in recent years in the ex ante equity risk premium. Empirical studies indicate that it is possible for the ex ante equity risk premium to be negative and that it is related to an inverted yield curve of government bonds. This finding holds for the U.S. marketplace...

In this paper, we examine the behavior of stock prices of individual firms with different bond ratings surrounding the October market crash of 1987 and therefrom make inferences about the significance of bankruptcy costs borne by stockholders. The key findings are as follows: Immediately...

In this paper, we examine the behavior of stock prices of individual firms with different bond ratings surrounding the October market crash of 1987 and therefrom make inferences about the significance of bankruptcy costs borne by stockholders. The key findings are as follows: Immediately...

Utilizing approximately 51,000 sample firms from developed markets over 1995-2014, we document a stark heterogeneity in global integration at the firm-level and study its implications for diversification. Specifically, the adjusted R-square, our integration measure, is widely distributed across...

Investors are known to exhibit home (local) bias even when they invest in their domestic markets. Since home bias is symptomatic of market segmentation, the ‘home bias at home' phenomenon raises an important question: How well integrated are domestic financial markets? The answer for this...

Using four decades of data, we provide novel evidence that the increasing interstate synchronization of house price growth leads to higher business cycle alignment across U.S. states. The relation is stronger between states with similar banking development and in non-tradable sectors, and is...

Consistent with predictions from the psychology literature, we find that stock prices co-move more (less) in culturally tight (loose) and collectivistic (individualistic) countries. Culture influences stock price synchronicity by affecting correlations in investors' trading activities and a...

Motivated by the rising importance of international sourcing by U.S. firms in recent decades, we study the influence of international sourcing on capital structure. We find that international sourcing has a significant negative influence on financial leverage. The negative influence is stronger...

China's stock markets have grown rapidly since their inception and have become an increasingly important emerging market for international investors. However, there are few systematic studies on how asset prices are formed in Chinese domestic equity markets; popular financial media even depict...