In the framework of a reduced form asset pricing model featuring linear-in-z betas and risk premiums with lagged macro instruments, I propose a clean measure of mispricing that is free from the omitted-variable bias due to either missing priced factors or missing instruments. Applying the model to U.S. stock returns for 1927-2005, I find that momentum and contrarian strategies are related to th...

It has been widely debated how much nonsynchronous trading drives asymmetric portfolio cross-autocorrelations: lagged returns on a portfolio of larger-capitalization stocks are far more heavily correlated with current returns on a portfolio of smallercapitalization stocks than the converse. This paper proposes a new method to generate precise estimates of the extent to which nonsynchronous trad...

In this study, we investigated the impact of COVID-19 investor sentiment (CS), number cases (CC), and deaths (CD) on bank stock returns in 16 MENA countries. addition, examined interaction effects CS with CC CD returns. Lastly, looked at whether Islamic banks outperformed conventional during pandemic. Based monthly data from Middle East North Africa (MENA) countries February 2020 to July 2021, ...

Hansen and Jagannathan (HJ, 1991) describe restrictions on the volatility of stochastic discount factors (SDFs) that price a given set of asset returns. This paper compares the sampling properties of different versions of HJ bounds that use conditioning information in the form of a given set of lagged instruments. HJ describe one way to use conditioning information. Their approach is to multipl...

Unlike previous studies examining the association between crude oil and renewable energy stock prices under average conditions, we employ a quantile-based regression approach offering more comprehensive dependence structure diverse market conditions. Using weekly data covering (WTI market) three clean indices (the Wilderhill Energy Index, MAC Global Solar S&P Clean Index), quantile analyses pro...

On average, hedge funds experience slow failures rather than sudden crashes. I model a fund’s probability of failure using a dynamic logit regression and find that fund failures are predicted by even 7-month lagged information. Hedge funds fail slowly as investors withdraw their funds over a period of time because of poor performance. Also, longer share restriction periods and the presence of m...

This paper presents evidence of persistent ‘bull’ and ‘bear’ regimes in UK stock returns and considers their economic implications from the perspective of an investor’s portfolio decisions. We Þnd that the perceived state probability has a large effect on the optimal allocation to stocks, particularly at short investment horizons. If ignored, the presence of such regimes gives rise to welfare c...

This study predicts cross-sectional investment (asset-normalized capital expenditures) innovations within the United States, Canada, Great Britain, (mainland) Europe, and Japan. We find that lagged stock returns are the most important cross-sectional predictors of investment increases – except in mainland Europe. American firms tend to react more than Japanese firms but less than Canadian and B...

Abstract Portfolio performance measures using holdings data are panel regressions. The returns of a fund’s stocks regressed on its lagged portfolio weights. Stock fixed effects isolate average from time-series predictive ability. Control variables condition for fund the characteristics held. long-term drives some classical measures, while ability others. A “buy-and-hold drift,” where weights in...

Several studies document that past returns and past trading volume predict shortterm stock returns. This study considers two new variables: the past number of trades signed as purchase and sale. These variables also predict weekly US stock returns and contain information that is distinct from past returns and past trading volume. Combined trading strategies outperform strategies based on past r...