Established illiquidity measures are constructed for emerging markets in Africa and used to determine which best explain trading costs. Costs of equity are derived from an augmented CAPM for a sample of emerging financial markets generally ignored in the literature. These include: South Africa and Namibia, three countries in North Africa and four in SSA, plus London and Paris as examples of int...

Studies have shown that firm asset growth predicts cross-sectional stock returns. Firms that shrink their assets earn superior returns while firms that substantially expand their assets incur poor returns in the following years. I show that the negative asset growth often implies poor operating performance and a high probability subsequently to be delisted from the exchanges and that the high a...

This paper offers a continuous time, general equilibrium model where a risky asset is traded among risk-averse overconfident investors. Two kinds of overconfidence are introduced: investors exhibit relative overconfidence if each investor believes her model is better than others’ and aggregate overconfidence if they believe signals have more information content than those in the true model. Rel...

Article history: Received 19 July 2012 Received in revised form 21 November 2013 Accepted 28 November 2013 Available online 7 December 2013 We investigate the pricing implication of liquidity risks in the liquidity-adjusted capital asset pricing model of Acharya and Pedersen (2005), using multiple liquidity measures and their principal component. While we find that the empirical results are sen...

Previous research on point spread betting assumed that bookmakers attract an equal volume of bets on either side of games in order to maximize profits. This paper examines the viability of this assumption from a theoretical and empirical perspective. The model of bookmaker behavior developed predicts that expected returns are not necessarily maximized when the volume of bets on each side of a g...

While economic variables have been used extensively to forecast the U.S. bond risk premia, little attention has been paid to the use of technical indicators which are widely employed by practitioners. In this paper, we fill this gap by studying the predictive ability of using a variety of technical indicators vis-á-vis the economic variables. We find that the technical indicators have significa...

Our objective in this article is to study analytically the effect of borrowing constraints on asset returns. We explicitly characterize the equilibrium for an exchange economy with two agents who differ in their risk aversion and are prohibited from borrowing. In a representative-agent economy with CRRA preferences, the Sharpe ratio of equity returns and the riskfree rate are linked by the risk...

This paper examines the relationship between seasonality, idiosyncratic risk and mutual fund returns using multifactor models. We use a large sample containing the return histories of 728 UK mutual funds over a 23-year period to measure fund performance. We present evidence that idiosyncratic risk cannot be eliminated, we also find evidence of seasonality in all fund categories. Specifically, w...