The paper shows that lottery-like stocks are hedges against unexpected increases in market volatility. The loading on the aggregate volatility risk factor explains low returns to stocks with high maximum returns in the past (Bali, Cakici, and Whitelaw, 2011) and high expected skewness (Boyer, Mitton, and Vorkink, 2010). Aggregate volatility risk also explains the new evidence that the maximum e...

This paper examines the conditions required to guarantee positive prices in the CAPM. Positive prices imply an upper bound on the equity premium. This upper bound depends on the degree of diversity of firms’ fundamentals, and it is independent of investors’ preferences. In economies with realistically diverse assets the only positive-price CAPM equilibrium theoretically possible is a degenerate...

Fama and French [2002. The equity premium. Journal of Finance 57, 637–659] estimate the equity premium using dividend growth rates to measure expected rates of capital gain. We apply their method to study the value premium. From 1945 to 2005, the expected value premium is on average 6.1% per annum, consisting of an expected dividend growth component of 4.4% and an expected dividend price ratio ...

In this paper, we develop an agency-theoretic extension of the Lucas asset pricing model and examine the resulting asset price dynamics. In the model, an agent of the firm can expand or contract the firm’s output and dividend payments in response to exogenous shocks, although expansions become increasingly costly for the agent to maintain. Analysis of numerical simulations shows that the time-s...

We propose a model with heterogeneous interacting traders which can explain some of the stylized facts of stock market returns. In the model, synchronization effects, which generate large fluctuations in returns, can arise purely from communication and imitation among traders. The key element in the model is the introduction of a trade friction which, by responding to price movements, creates a...

In this paper we examine whether past returns of the market portfolio (MKT), the size portfolio (SMB), the book-to-market portfolio (HML) and the idiosyncratic volatility portfolio (HIMLI) can predict growth rates of ten major Australian economic indicators from 1993 to 2010. We find that all four factors can be used to predict growth rates in Australian economic indicators. We also find high r...

This paper revisits the time-series relation between the conditional risk premium and variance of the equity market portfolio. The main innovation is that we construct a measure of the ex ante equity market risk premium using corporate bond yield spread data. This measure is forward-looking and does not rely critically on either realized equity returns or instrumental variables. We find strong ...

The paper develops a quality adjusted professional sports franchise price index for North America based on a repeat sale method. This index reflects trends in the general price of sports franchises holding local market, facility, and team characteristics constant. The price index exhibits considerable volatility but no upward trend over time, unlike previous quality adjusted price indexes based...

To examine the epidemiology of rotaviruses in Buenos Aires, Argentina, we screened 1,212 stool samples from children with diarrhea in the southern district of Buenos Aires from 1999 to 2003. We identified 187 samples (15.4%) that were positive for group A rotavirus by use of antigen enzyme-linked immunosorbent assay. Among these specimens, 112 were available for typing: 93 (83.0%) were single-t...

Competition among stock exchanges has increased dramatically over the last decade. To attract trading volume, most exchanges introduced makertaker fees, an incentive scheme that rewards liquidity suppliers and charges liquidity demanders. Using a change in fees on the Toronto Stock Exchange, we analyze how the breakdown of trading fees between liquidity demanders and suppliers affects market ou...