Empirical studies have found that during bad times return predictability is higher. Thus, variation in discount rate news should be relatively higher as economic conditions worsen. We propose a parsimonious model for expected returns that captures the countercyclical dynamics of stock return...

Recent evidence suggests that there is strong relation between investor sentiment and cross-sectional anomalies. However, I present evidence of a weak relation between cross-sectional anomalies and investor sentiment. Using a larger collection of cross-sectional anomalies, I find that only a...

This paper tests the relationship between financial development and income inequality differentiating between gross- and net income inequality in a cross-country setting, using a new standardized database of income inequality. Financial development does negatively affect income inequality...

The CAPM is commonly used for an introduction of the equity cost in practice to calculate the corporate value, which is composed by the risk-free rate, equity market return and each respective beta. However, there is a fundamental complication between the risk, cost and return for the equity...

We introduce the beta stochastic volatility model and discuss empirical features of this model and its calibration. This model is appealing because, first, its parameters can be easily understood and calibrated and, second, it produces steeper forward skews, compared to traditional stochastic...

The use of credit ratings has been advocated by regulators in the US as well as in Europe. The creation of “Nationally Recognized Statistical Rating Organizations” statue strengthened the appearance of the triopoly of Moody's, Standard & Poor's and Fitch thus creating a de jure dominant...