The authors test whether the reaction of international stock markets to oil shocks can be justified by current and future changes in real cash flows and/or changes in expected returns. They find that, in the postwar period, the reaction of U.S. and Canadian stock prices to oil shocks can be...

The authors show that the returns to the typical long-term contrarian strategy implemented in previous studies are upwardly biased because they are calculated by cumulating single-per iod (monthly) returns over long intervals. The cumulation process not on ly cumulates "true" returns but also...

Prior work with competitive rational expectations equilibrium models indicates that there should be a positive relation between trading volume and differences in beliefs or information among traders. We show that this result is sensitive to whether and how transaction costs are modeled. In a...

The fragility of the CAPM has led to a resurgence of research that frequently uses trading strategies based on sorting procedures to uncover relations between firm characteristics (such as "value" or "glamour") and equity returns. We examine the propensity of these strategies to generate...

In this paper, the authors investigate the effects of relative price variability on output and the stock market, and gauge the extent to which inflation proxies for relative price variability in stock-return-inflation regressions. The evidence shows that the negative stock-return-inflation...