Stock investments have become increasingly international, but only recently a deeper theoretical understanding of the forces influencing global stock market returns has been gained from empirical studies. This is a crucial issue for asset managers in order to control the risks and exposures of...

A measurement error in beta that arises from changes in leverage during the beta estimation window contributes in explaining the size effect. Simulations of asset returns show that the magnitude of the bias in equity returns is proportional to the stock market-induced changes in leverage. We...