We adapt a metric of Kandel and Stambaugh (1995) to evaluate linear asset pricing models. The quot;KS-ratioquot; criterion rates a model's usefulness based on the mean portfolio return a mean-variance decision maker obtains for any variance choice by using the model for optimal portfolio...

We examine net arbitrage trading (NAT) measured by the difference between quarterly abnormal hedge fund holdings and abnormal short interest. NAT strongly predicts stock returns in the cross section. Across 10 well-known stock anomalies, abnormal returns are realized only among stocks...