In investment, particularly in the portfolio management, the risk and returns are two crucial measures in making investment decisions. This paper attempts to provide a brief theoretical explanation with examples on determining the returns and associated risk of shares, and of the portfolio of...

This paper aims to analyze so-called anomalies or additional risk factors (other than market risk) on the Hong Kong stock exchange. To do so, we first select arbitrarily several factors that we a priori believe to be significant, we then collect the data and evaluate the returns associated with...

The construction of the original HML portfolio (Fama and French, 1993) includes six seemingly innocuous decisions that could easily have been replaced with alternatives that are just as reasonable. I propose such alternatives and construct HML portfolios. In sample, the average estimate of the...

The authors study whether the pricing of systematic factors depends on the investment horizon over which risk is measured. Market beta and Fama--French value beta are priced when risk is measured over intermediate horizons, while liquidity beta is priced over short horizons. Alpha on a...

When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...

This paper decomposes firm-specific monthly-varying Amihud (2002) illiquidity measure into two components: (i) systematic illiquidity; (ii) idiosyncratic illiquidity. While there is a positive and significant relationship between systematic illiquidity and one-month-ahead stock returns, the...

This paper studies portfolio optimization through improvements of ex-ante conditional covariance estimates. We use the cross-section of stock returns over a 52-year sample to analyze trading performance by implementing the machine learning algorithm of hierarchical clustering. We find that...

The problem of return on current assets and return on working capital related to the cost of equity invested in a company is analyzed in this paper. Risk - return and liquidity - profitability trade-offs influence the company’s equilibrium and management decisions. Liquidity is measured by the...

We merge the literature on downside return risk and liquidity risk and introduce the concept of extreme downside liquidity (EDL) risks. The cross-section of stock returns reflects a premium if a stock's return (liquidity) is lowest at the same time when the market liquidity (return) is lowest....