Abstract Factor momentum produces robust average returns that exhibit a similar economic magnitude as stock price momentum. To the extent post-earnings announcement drift (PEAD) factor captures mispricing, winner factors earn profits from being long on underpriced stocks and short overpriced stocks. Conversely, loser-factors’ negative exposure to PEAD suggests loser capture mispricing by Option...

This article provides an empirical investigation into the validity of the production-based capital asset-pricing model (P-CAPM) in the Japanese asset markets during the period 1980-1997. Several methodologies are used to test the P-CAPM, which include the GMM test of the Euler equations, the volatility bound test, the mispricing test, and the test of the ability of stock and investment returns ...

We find dealer-level evidence that recent regulation on the leverage ratio requirement causes deviations from covered interest parity. Our analysis uses a unique data set of currency derivatives with disclosed counterparty identities together exogenous variation introduced by U.K. framework. Dealers who are affected regulatory shock charge an additional premium about 20 basis points per annum f...

This paper provides a global asset pricing perspective on the debate over the relation between predetermined attributes of common stocks, such as ratios of price-to-bookvalue, cash̄ow, earnings, and other variables to the future returns. Some argue that such variables may be used to ®nd securities that are systematically undervalued by the market, while others argue that the measures are proxies...

What are the equilibrium features of a dynamic …nancial market where traders care about their reputation for ability? We modify a standard sequential trading model to study a …nancial market with career concerns. We show that this market cannot be informationally e¢ cient: there is no equilibrium in which prices converge to the true value, even after an in…nite sequence of trades. This …nding, ...

There has been a recent debate in the marketing literature concerning the possible mispricing of customer satisfaction. While earlier studies claim that portfolios with attractive out-of-sample properties can be formed by loading on stocks whose firms enjoy high customer satisfaction, later studies challenge this finding. A large part of the disagreement stems from the difficulty of how to actu...

These notes consider Abreu and Brunnermeier’s (2003) paper on the failure of rational arbitrage in asset markets. Recall that the “no-trade” theorem states that speculative bubbles cannot exist in a world with only rational traders even if there is asymmetric information, so long as these traders share a common prior. Believers in the efficient market hypothesis argue that even if there are als...