Jensen developed a well-known portfolio performance evaluation measure. Subsequently, Jensen formulated a return-generating model to measure portfolio performance. Lee proposed a generalized specification of the model. This paper investigates the implications of the generalized return-generating...

In this paper we address three main objections of behavioral finance to the theory of rational finance, considered as “anomalies” the theory of rational finance cannot explain: (i) Predictability of asset returns; (ii) The Equity Premium; (iii) The Volatility Puzzle. We offer resolutions of...