Generalizing Cooper-Kaplanis (1994), we estimate implied costs that reconcile international portfolios with InCAPM predictions. Costs depend on home- and host-country characteristics and on interactions; we estimate risk tolerance rather than pre-specifying it; and we control for currency risk,...

Using an international Thomson Reuters Datastream database, where size coverage is unusually wide and data errors have been reduced to a low level, we show that some specification decisions, and especially those related to size, may have a significant impact on asset-pricing test results. We...

Using an international Thomson Reuters Datastream database, where size coverage is unusually wide and data errors have been reduced to a low level, we show that some specification decisions, and especially those related to size, may have a significant impact on asset-pricing test results. We...

The martingale hypothesis for futures prices is investigated using a nonparametric approach where it is assumed that the expected futures returns depend (nonparametrically) on a linear combination of predictors. We first collapse the predictors into a single‐index variable where the weights...

Regressions often use pre-orthogonalized regressors: prior to the main regression, an independent variable xi is regressed upon the other regressor(s), and its residuals are used in the right-hand side of the main regression instead of the raw variable itself. For example, the exposure of a...

Since Roll (The Journal of Finance 47(1):3-41, 1992) and Heston and Rouwenhorst (Journal of Financial Economics 36:3-27, 1994), there has been a debate whether country factors in international stock returns are typically more variable than sector factors. The addition of emerging markets (EMs)...

<heading id="h1" level="1" implicit="yes" format="display">ABSTRACT</heading> The forward puzzle is traditionally explained as the presence of a covariance-risk premium, market friction or limits to arbitrage. Recently, Liu and Sercu, working on intra-ERM rates for the DEM, presented evidence consistent with career risk considerations: portfolio managers shun...