In intertemporal asset pricing models, transaction costs are usually neglected. In this paper we explicitly incorporate transaction costs in these models and analyze to what extent this extension is helpful in explaining the cross-section of expected returns. An empirical analysis using CRSP...

In this paper, we analyze the economic value of predicting index returns as well as volatility. On the basis of fairly simple linear models, estimated recursively, we produce genuine out-of-sample forecasts for the return on the S\&P 500 index and its volatility. Using monthly data from 1954 to...

Standard factor models imply a linear relationship between expected returns on assets and their factor exposures. We provide the asymptotic properties of factor-model-based expected return estimators for individual assets and show that exploiting this linear relationship leads to precision gains...

This paper examines the question: Does regulatory approval of prospectuses act as a “certification” of securities offerings? Rational investors should generally ignore prospectus approval due to its being uninformative regarding either the quality of, or motives for, the underlying offering....