The failure of consumption based asset pricing models to match the stochastic properties of the equity premium and the risk-free rate has been attributed by some authors to frictions, transaction costs or durability. However, such frictions would primarily affect the higher frequency data...

A set of recent papers attempts to explain the size and book-to-market anomalies with conditional CAPM or CCAPM models with economically motivated conditioning variables, or with factor models with economically motivated factors. The tests of these models, as presented, fail to reject the...

We examine carry trade returns formed from the G10 currencies. Performance attributes depend on the base currency. Dynamically spread-weighting and risk-rebalancing positions improves performance. Equity, bond, FX, volatility, and downside equity risks cannot explain profitability....

Despite their strong positive average returns across numerous asset classes, momentum strategies can experience infrequent and persistent strings of negative returns. These momentum crashes are partly forecastable. They occur in "panic" states - following market declines and when market...

Abel's (1998) intertemporal asset pricing model implies that the autocorrelation pattern in expected returns reflects that observed in output growth rates. Consequently, by using the observed autocorrelation properties of macroeconomic data, we are able to provide univariate tests with power to...

We propose a theory of securities market under- and overreactions based on two well-known psychological biases: investor overconfidence about the precision of private information; and biased self-attribution, which causes asymmetric shifts in investors' confidence as a function of their...

This paper explains why investors are likely to be overconfident and how this behavioral bias affects investment decisions. Our analysis suggests that investor overconfidence can potentially generate stock return momentum and that this momentum effect is likely to be the strongest in those...

Japanese stock returns are even more closely related to their book-to-market ratios than are their U.S. counterparts, and thus provide a good setting for testing whether the return premia associated with these characteristics arise because the characteristics are proxies for covariance with...