We argue that the empirical evidence against the Capital Asset Pricing Model (CAPM) based on stock returns does not invalidate its use for estimating the cost of capital for projects in making capital budgeting decisions. Since stocks are backed not only by projects in place, but also the...

We show that a mutual fund's stock selection skill can be decomposed into additional components that include impatient quot;informed tradingquot; and quot;liquidity provision.quot; We validate our method by verifying that liquidity providing trades are the primary source of value for the...

We show that a mutual fund's quot;stock selection skillquot; computed using the Daniel, Grinblatt, Titman and Wermers (1997) procedure can be decomposed into additional components that include impatient quot;informed tradingquot; and quot;liquidity provision,quot; thereby helping us understand...

According to the dynamic version of the Gordon growth model, the long-run expected return on stocks, stock yield, is the sum of the dividend yield on stocks plus some weighted average of expected future growth rates in dividends. We construct a measure of stock yield based on sell-side analysts'...

According to the dynamic version of the Gordon growth model, the long-run expected return on stocks, stock yield, is the sum of the dividend yield on stocks plus some weighted average of expected future growth rates in dividends. We construct a measure of stock yield as a model-imposed affine...

We examine net arbitrage trading (NAT) measured by the difference between quarterly abnormal hedge fund holdings and abnormal short interest. NAT strongly predicts stock returns in the cross section. Across 10 well-known stock anomalies, abnormal returns are realized only among stocks...

We use granular data covering regulated (brokerage-financed) and unregulated (shadow-financed) margin trading during the 2015 market turmoil in China to provide the first systematic analysis of margin investors’ characteristics, leverage management policies, and liquidation choices. We show...