Three concepts: stochastic discount factors, multi-beta pricing and mean-variance efficiency, are at the core of modern empirical asset pricing. This chapter reviews these paradigms and the relations among them, concentrating on conditional asset-pricing models where lagged variables serve as...

Impact of chosen behavioural factors on imprecision risk burdening present value is discussed here. The formal model of behavioural present value is offered as a result of this discussion. Behavioural present value is described here by fuzzy set. These considerations were illustrated by means of...

When Capital Asset pricing Model (CAPM) is considered as valid asset pricing theory, Security Market Line (SML) is supposed to give ex-ante returns for the single period investment horizon. Since the required returns should be same as the cost of equity (discount rates) in efficient markets, SML...

We test whether asymmetric preferences for losses versus gains as in Ang, Chen, and Xing (2006) also affect the pricing of cash flow versus discount rate news as in Campbell and Vuolteenaho (2004). We construct a new four-fold beta decomposition, distinguishing cash flow and discount rate betas...

We examine whether sensitivities to cash flow (CF) and discount rate (DR) risk in down markets provide an explanation for the investment effect, where low-investment stocks earn higher expected returns than high-investment stocks. We show how productivity and financing constraints asymmetrically...

The finance literature has documented a number of timing strategies that obtain superior Sharpe ratios and alphas relative to underlying buy-and-hold portfolios by employing simple calendar- or indicator-based weighting schemes. I document a novel fact regarding such timing strategies: the...

We perform an extensive and robust study of the performance of three different pairs trading strategies - the distance, cointegration, and copula methods - on the entire US equity market from 1962 to 2014 with time-varying trading costs. For the cointegration and copula methods, we design a...

Operating leverage (OL) and profitability are interrelated determinants of stock returns. We show that the outperformance of firms with high OL is driven by periods of unconstrained aggregate funding conditions. Firms with high OL are more risky in general, but when the Fed eases funding...

Academic studies show that technical trading rules would have earned substantial excess returns over long periods in foreign exchange markets. However, the approach to risk adjustment has typically been rather cursory. We examine the ability of a wide range of models: CAPM, quadratic CAPM,...