This article empirically examines the relationship between order sizes and spreads in the foreign exchange market based on a FX dealer’s quotes. It is found that spreads are independent of order sizes in the inter-dealer market, but they are negatively correlated in the customer market. JEL classification: F31; G14

Using Monte Carlo simulations, I show that typical out-of-sample forecast exercises for stock returns are unlikely to produce any evidence of predictability, even when there is in fact predictability and the correct model is estimated. JEL classification: C15; C53; G14.

We consider Kyle’s market order model of insider trading with multiple informed traders and show: if a linear equilibrium exists for two different numbers of informed traders, asset payoff and noise trading are independent and have finite second moments, then these random variables are normally distributed. Journal of Economic Literature Classification Numbers: C62, D82, G14.

We review the literature on return and cash flow growth predictability form the perspective of the present-value identity. We focus predominantly on recent work. Our emphasis is on U.S. aggregate stock return predictability, but we also discuss evidence from other asset classes and countries. JEL classification: G10, G12, G14, G35.

It is shown that the absence of call spread, butterfly spread and calendar spread arbitrages is sufficient to exclude all static arbitrages from a set of option price quotes across strikes and maturities on a single underlier.  2005 Elsevier Inc. All rights reserved. JEL classification: G10; G12; G13; G14

We use a stock-market game and predictions of examination marks to examine differences between overconfidence and biased self-attribution (BSA) of British and Asian students. Although different overconfidence measures show little correlation, Asians are consistently more overconfident than the British. All are equally prone to BSA. © 2007 Elsevier Inc. All rights reserved. JEL classification: G...

The SRI funds performances remain inconclusive. Hence, more studies need to be conducted to determine if SRI funds systematically underperform or outperform conventional funds. This paper has employed dynamic mean-variance model using shortage function approach to evaluate the performance of SRI and Environmentally friendly funds. Unlike the traditional methods, this approach estimate fund perf...

Employing the one-step stochastic frontier analysis (SFA) approach, this paper examines bank efficiency in China, paying special attention to the ownership, selection effect and dynamic effects of governance changes on bank performance. Bank efficiency has improved over the data period 1995-2008. The estimated average cost and profit efficiencies are 74% and 63% respectively. Joint Stock Commer...

The authors examine how the co-movement between daily stock and Treasury bond returns varies with stock market uncertainty. They use the lagged implied volatility from equity index options to provide an objective, observable, and dynamic measure of stock market uncertainty. The authors find that stock and bond returns tend to move substantially together during periods of lower stock market unce...

Assumptions about the dynamic and distributional behavior of risk factors are crucial for the construction of optimal portfolios and for risk assessment. Although asset returns are generally characterized by conditionally varying volatilities and fat tails, the normal distribution with constant variance continues to be the standard framework in portfolio management. Here we propose a practical ...