Compared with the market, value, or size factors, momentum has offered investors the highest Sharpe ratio. However, momentum has also had the worst crashes, making the strategy unappealing to investors who dislike negative skewness and kurtosis. We find that the risk of momentum is highly...

The Intertemporal CAPM (ICAPM) by Merton (1973) has had a strong impact in empirical asset pricing leading to numerous multifactor models. This paper shows that the explanatory power of the ICAPM application by Campbell and Vuolteenaho (2004) relies critically on the computation of Dimson (1979)...

I analyze the effect of monetary policy actions on the cross-section of equity returns. Based on earlier theoretical work for the monetary transmission mechanism one can argue that changes in monetary policy should produce differentiated effects on firms and stocks with different...

We derive a parsimonious three-factor asset pricing model (cross-sectional CAPM, CS-CAPM) in which stock return dispersion (realized cross-sectional variance of long-short equity portfolios) and stock return skewness (realized cross-sectional skewness of equity portfolios) are the driving forces...

This paper derives and tests an ICAPM based on a conditional version of the two-beta ICAPM (bad beta, good beta, BBGB) from Campbell and Vuolteenaho (2004). The novel factor is a scaled cash-flow factor that results from the interaction between cash-flow news and a lagged state variable (market...

The focus of this paper is on the predictive role of the stock-bond yield gap---the difference between the stock market earnings (dividend) yield and the ten-year Treasury bond yield---also know as the quot;Fed modelquot;. The results show that the yield gap forecasts positive excess market...