We study asset-pricing implications of innovation in a general-equilibrium overlappinggenerations economy. Innovation increases the competitive pressure on existing firms and workers, reducing the profits of existing firms and eroding the human capital of older workers. Due to the lack of inter-generational risk sharing, innovation creates a systematic risk factor, which we call “displacement r...

This study tests the presence of the day of the week effect on stock market volatility by using the S&P 500 market index during the period of January 1973 and October 1997. The findings show that the day of the week effect is present in both volatility and return equations. While the highest and lowest returns are observed on Wednesday and Monday, the highest and the lowest volatility are obser...

We formulate a consumption-based asset pricing model in which aggregate risk aversion is time-varying in response to both news about consumption growth (as in a habit formation model) and news about inflation. We estimate our model and explore its pricing implications for the term structure of interest rates and the cross-section of stock returns. Our empirical results support the hypothesis th...

Alizadeh, Brandt, and Diebold [2002. Journal of Finance 57, 1047–1091] propose estimating stochastic volatility models by quasi-maximum likelihood using data on the daily range of the log asset price process. We suggest a related Bayesian procedure that delivers exact likelihood based inferences. Our approach also incorporates data on the daily return and accommodates a nonzero drift. We illust...

Abstract This paper highlights the adverse consequences of sluggish credit rating updates in creating information efficiency distortions and investment anomalies. We first document significant default swap (CDS) return momentum yielding 7.1% per year. further show that cross-market strategies based on past CDS performance generates an alpha 10.3% year stocks 7.3% bonds. These effects are strong...

Abstract This paper explores the impact of product market competition on positive relation between labor mobility (LM) and future returns. We develop a production-based model formalize intuition that low exposure to systematic risk in concentrated industry limits LM’s amplifying effect operating leverage. Therefore, predicts stronger LM expected returns for firms competitive industries. Consist...

This paper offers an alternative explanation for what is typically referred to as an asset pricing bubble. We develop a model that formalizes the Cochrane (2002) convenience yield theory of technology company stocks to explain why a rational agent would buy an “overpriced” security. Agents have a desire to trade but short-sale restrictions and other frictions limit their trading strategies and ...

Food commodity price fluctuations have an important impact on poverty and food insecurity across the world. Conventional models have not provided a complete picture of recent price spikes in agricultural commodity markets, while there is an urgent need for appropriate policy responses. Perhaps new approaches are needed in order to better understand international spill-overs, the feedback betwee...

Asset prices observed in financial markets combine equilibrium prices and market microstructure noise. In this paper, we study how to tell apart large shifts in equilibrium prices from noise using high frequency data. We propose a new nonparametric test which allows us to asymptotically remove the noise from observable price data and to discover jumps in fundamental asset values. We provide its...

Heavy share buyback years after the global finance crisis 2008–2009 drew criticism from scholars and financial press that repurchases were being used by firms to manipulate their stock prices. This paper examines whether a greater firm’s repurchase intensity distorts prices reflecting information. We analyse 2 sets of unbalanced panel data contain sample 337 US another 167 Malaysian repurchasin...