By allowing for imperfectly informed markets and the role of private information, we offer new insights about observed deviations of portfolio concentrations in domestic relative to foreign risky assets, or home bias, from what standard finance models predict. Our model ascribes the bias to...

This paper is concerned with testing the time series implications of the capital asset pricing model (CAPM) due to Sharpe (1964) and Lintner (1965), when the number of securities, N, is large relative to the time dimension, T, of the return series. In the case of cross-sectionally correlated...

Bitcoin in particular and so-called cryptocurrencies in general have shaken up the financial world and seem to be claiming an increasing size of the market share. These new virtual assets present investors with significant opportunities, but also with significant risks. This paper analyzes the...

This paper is concerned with testing the time series implications of the capital asset pricing model (CAPM) due to Sharpe (1964) and Lintner (1965), when the number of securities, N, is large relative to the time dimension, T, of the return series. In the case of cross-sectionally correlated...

By allowing for imperfectly informed markets and the role of private information, we offer new insights about observed deviations of portfolio concentrations in domestic relative to foreign risky assets, or "home bias", from what standard finance models predict. Our model ascribes the "bias" to...

We combine a customized survey and randomized controlled trial (RCT) to study the effect of higher-order beliefs on U.S. retail investors' portfolio allocations. We find that investors' higher-order beliefs about stock market returns are correlated with but distinct from their first-order...

A common approach to dealing with missing data is to estimate the model on the common subset of data, by necessity throwing away potentially useful data. We derive a new probit type estimator for models with missing covariate data where the dependent variable is binary. For the benchmark case of...

There is a large literature estimating Arrow-Pratt coefficients of absolute and relative risk aversion. A striking feature of this literature is the very wide variation in the reported estimates of the coefficients. While there are often legitimate reasons for these differences in the estimates,...

What role does labor play in firms? market value? We explore this question using a production-based asset pricing model with frictions in the adjustment of both capital and labor. We posit that hiring of labor is akin to investment in capital and that the two interact, with the interaction being...

This paper is concerned with empirical and theoretical basis of the Efficient Market Hypothesis (EMH). The paper begins with an overview of the statistical properties of asset returns at different frequencies (daily, weekly and monthly), and considers the evidence on return predictability, risk...