In this paper we consider the problem of estimating high-frequency beta of an asset return when the returns are subject to the effects of market microstructure. Specifically, we study the correlation between intraday log returns of two assets. Our investigation starts with the effect of non-synchronous trading on intraday log returns when the underlying return series follows a stationary time s...

This paper studies a representative-agent asset-pricing model of an endowment economy in which the agent has incomplete knowledge about exogenous stochastic endowment process and has incentive to learn about the process with adaptive learning rules. There is the well documented fact that when underlying economic environment is known and is common knowledge to investors, asset-pricing models und...

Recent research in empirical finance has documented that expected excess returns on bonds and stocks, real interest rates, and risk shift over time in predictable ways. Furthermore, these shifts tend to persist over long periods of time. In this paper we propose an empirical model that is able to capture these complex dynamics, yet is simple to apply in practice, and we explore its implications...

the main purpose of this paper is to investigate the performance of nigerian insurance companies using data envelopment analysis (dea). because of the unavailability of the required data, the study is limited to ten nigerian insurance companies for the period of five years from 2008 to 2012. the input employed were commission expenses and management expenses, while premium and investment income...

Three major puzzles, described later in this section, have captured the attention of macroeconomic finance: the equity-premium, riskfreerate and equity-volatility puzzles. A common strand of these three asset-return puzzles is that markets are behaving as if investors fear some unknown hidden randomness that isn’t obvious from the data. People are acting in the aggregate like there is much more...

We establish several new findings on the relation between open interest in commodity markets and asset returns. High commodity market activity, as measured by high open-interest growth, predicts high commodity returns and low bond returns. Openinterest growth is a more powerful and robust predictor of commodity returns than other known predictors such as the short rate, the yield spread, the ba...

The regression of stock returns on predictive variables, such as dividend yield, has proven useful in optimal portfolio selection when investment opportunities are timevarying. Conditional versions of factor models impose a restriction on that regression, thereby implying a particular portfolio choice. The study examines several pricing models from a perspective of conditional mean-variance opt...

We study an investor’s optimal consumption and portfolio choice problem when he confronts with two possibly misspecified submodels of stock returns: one with IID returns and the other with predictability. We adopt a generalized recursive ambiguity model to accommodate the investor’s aversion to model uncertainty. The investor deals with specification doubts by slanting his beliefs about submode...

Cross-asset derivative securities are studied and a dichotomous asset pricing model (DAPM) is derived that significantly enriches the Sharpe-Lintner-Black capital asset pricing model. An assets beta is shown to be observable ex ante through the price of its cross-market call or put, and the DAPM separately predicts the assets’ expected return beta relations under the upper-market and lower-mark...

We show that Black Capital Asset Pricing Model (Black CAPM) is extremely sensitive to the choice of the market portfolio and becomes unstable as market portfolios approach the Global Minimum-Variance portfolio. When market portfolios approach the minimum-variance portfolio, the expected return on the zero beta asset approaches negative infinity and its variance increases rapidly. Moreover, expe...