Recent studies of conditional factor models do not specify conditioning information but use data from small windows to estimate the time series of conditional alphas and betas. In this paper, we propose a nonparametric method using an optimal window to estimate time-varying coefficients. In...

We document a new stylized fact regarding the dynamics of the commodity convenience yield: the volatility of the convenience yield is heteroskedastic for industrial commodities; specically, the volatility (variance) of the convenience yield depends on the convenience yield level. To explore 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...

The relative predictability of returns and dividends is a central issue since it forms the paradigm to interpret asset price variation. A little studied question is how dividend smoothing, as a choice of corporate policy, affects predictability. We show that, even if dividends are supposed to be...

We find the disparity between long-term and short-term analyst forecasted earnings growth is a robust predictor of future returns and revisions in long-term forecasted earnings growth. After adjusting for industry characteristics, stocks whose long-term earnings growth forecasts are far above or...

Turnover, extreme returns, news and advertising expense are indirect proxies of investor attention. In contrast, we propose a direct measure of investor demand for attention -- active attention -- using search frequency in Google (SVI). In a sample of Russell 3000 stocks from 2004 to 2008, we...

We provide empirical evidence supporting the view that a sharp rise in a firm's default likelihood causes a change in its shareholder clientele: mutual funds decrease their holdings of the firm's share, trading volume and cost increase, and the order imbalance measure indicates large selling...

This paper develops a formal economic theory to explain the Easterlin paradox-average happiness levels do not necessarily increase as countries grow wealthier. The theory analyzes the different roles of income and non-income factors in promoting people's happiness, and provides a foundation for...

We analyze a model where the value of a traded security is affected by two different fundamentals, e.g., the quality of the firm's technology and the demand for its products, and where there are two groups of informed traders, each one informed about a different fundamental. We analyze the...