This paper applies log-periodogram estimators of the fractional difference parameter to the volatility of the US dollar exchange rate returns of 11 European currencies, and under temporal aggregation from an underlying half-hourly intra-day frequency. Particular attention is paid to the...

In this paper we use generally applicable non-parametric methods in an attempt to sort out the possible sources of momentum in stock markets (behavioural theories or omitted risk factors). Specifically, we present the results of bootstrap analysis and stochastic dominance tests for the Spanish...

We estimate a state-dependent multifactor model with two endogenous states. Its pricing accuracy is slightly superior to that of the Fama and French (1993, 1996) model. We have evidence for dramatically increased factor loadings for distress factors in one state. These results have implications...

“Alpha” has symbolic importance on the investments side of finance. That is, a fundamental pillar of modern finance theory is the risk-return relation, and traditionally alpha is taken to represent the degree of “mispricing” in asset returns. But, such an interpretation is not always...

I review recent research efforts in the area of empirical cross-sectional asset pricing. I start by summarizing the evidence on cross-sectional return predictability and the failure of standard (consumption) CAPM models and their conditional versions to explain these predictability patterns. One...

We present a tractable, linear model for the simultaneous pricing of stock and bond returns that incorporates stochastic risk aversion. In this model, analytic solutions for endogenous stock and bond prices and returns are readily calculated. After estimating the parameters of the model by GMM,...

Price jumps are mostly related to investor reactions to unexpected extreme news. We perform an event study of price movements after jumps to analyse if investors' reactions are affected by psychological biases. We employ recent non-parametric methods based on intraday returns to separate large...

New perspectives on consumption-based asset pricing models have recently been argued to provide powerful insights for explaining the cross-sectional variation of expected returns. In this paper, we employ both Spanish and U.S. capital markets data to present further evidence on these new...

We evaluate predictive regressions that explicitly consider the time-variation of coefficients in a comprehensive Bayesian framework. For monthly returns of the S&P 500 index, we demonstrate statistical as well as economic evidence of out-of-sample predictability: relative to an investor using...