Assuming that risk premiums are determined by failure risk, we present a stylized model of interactions among risk-proxy variables, external financing, and stock returns in which a common mispricing factor, involving operating profit and external financing, drives the following five asset...

Previous research documents evidence that stocks with high (low) returns in the past 3-12 months subsequently have high (low) returns in the subsequent 3-12 months, but thereafter this 'momentum' effect is reversed. Jegadeesh and Titman (2001) tentatively attribute these phenomena to behavioral...