To attenuate an inherent errors-in-variables bias, portfolios are widely employed for risk premium estimation; but portfolios might diversify away and thus mask relevant risk- or return-related features of individual assets. We propose a resolution that allows the use of individual assets while...

To attenuate an inherent errors-in-variables bias, portfolios are widely employed to test asset pricing models; but portfolios might mask relevant risk- or return-related features of individual assets. We propose an instrumental variables approach that allows the use of individual stocks as test...

This paper investigates whether analysts' estimates of firm fundamental value transmit unique information to security markets. Previous work has not studied analyst value estimates because of the scarcity of the release of such data. This study circumvents that limitation by considering the one...

We propose an estimator for the stochastic discount factor (SDF) that does not require macroeconomic proxies or preference assumptions. It depends only on observed asset returns, yet is immune to the form of the multivariate return distribution, including the distribution's factor structure....

The Fama-Macbeth (1973) rolling-beta method is widely used for estimating risk premiums, but its inherent errors-in-variables bias remains an unresolved problem, particularly when using individual assets or macroeconomic factors. We propose a solution with a particular instrumental variable,...

Changing expected returns can induce spurious autocorrelation in returns. We show why this happens with simple examples and investigate its prevalence in actual equity data. In a key contribution, we use shifts in ex ante expected return estimates from options prices, factor models, and...

Movements in expected returns (ER) can cause a bias in measured autocorrelations, and the resulting spurious component is positive for infrequent regime shifts. We demonstrate this point analytically and investigate its empirical prevalence. In a key contribution, we use shifts in ex ante ER...