We develop a jackknife estimator for the conditional variance of a minimum-tracking- error-variance portfolio constructed using estimated covariances. We empirically evaluate the performance of our estimator using an optimal portfolio of 200 stocks that has the lowest tracking error with respect...

Mean-variance efficient portfolios constructed using sample moments often involve taking extreme long and short positions. Hence practitioners often impose portfolio weight constraints when constructing efficient portfolios. Green and Hollifield (1992) argue that the presence of a single...

I show that frequent batch auctions for stocks have the potential to reduce the severity of stock price crashes when they occur. For a given sequence of orders from a continuous electronic limit order book market, matching orders using one second apart batch auctions results in nearly the same...

We demonstrate, using data for the period 1954-2003, that differences in exposure to consumption risk explains cross sectional differences in average excess returns (cost of equity capital) across the 25 benchmark equity portfolios constructed by Fama and French (1993). We use yearly returns on...

We show that superior performance relative to peers during stressful times identifies higher quality firms as measured by conventional historical financial statement based measures as well as default probability measures. Quality measured this way is persistent, but different from price...

We present a latent variable model of dividends that predicts, out-of-sample, 39.5% to 41.3% of the variation in annual dividend growth rates between 1975 and 2016. Further, when learning about dividend dynamics is incorporated into a long-run risks model, the model predicts, out-of-sample,...

We combine self-collected historical data from 1867 to 1907 with CRSP data from 1926 to 2012, to examine the risk and return over the past 140 years of one of the most popular mechanical trading strategies -- momentum. We find that momentum has earned abnormally high risk-adjusted returns -- a...

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'...

We provide empirical support for the conventional wisdom that there are times when optimistic investors tend to build their hopes into castles in the air, and pay a large premium over intrinsic value for stocks of firms in the early stages of their life cycles with perceived growth...

Momentum strategies exhibit rare but dramatic losses (crashes), which we show are a result of the leverage dynamics of stocks in the momentum portfolio. When the economy is in a hidden turbulent state associated with a depressed and volatile stock market, the short-side of the momentum portfolio...