Like the stock market, the human capital market consists of a wide range of assets, i.e. educations. Each young individual chooses the educational asset that matches his preferred combination of risk and return in terms of future income. A unique register-based data set with exact information on type and level of education enables us to focus on the shared features between human capital and sto...

Traders in a market typically have widely different, private information on the return of an asset. The equilibrium price of the asset may reflect this information more accurately if the number of traders is large enough compared to the number of the states of the world that determine the return of the asset. We study the transition from markets where prices do not reflect the information accur...

The aim of this article is to examine the presence of volatility transmission between futures index and underlying stock index by using intraday data in Turkey. We first examined the sudden changes in the variance of futures index return and the underlying spot index return. Then we employed the causality in the variance tests proposed by Hong (2001) and Hafner and Herwartz (2006). According to...

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 investigate the risk-return relation in international stock markets using realized variance constructed from MSCI (Morgan Stanley Capital International) daily stock price indices. In contrast with the capital asset pricing model, realized variance by itself provides negligible information about future excess stock market returns; however, we uncover a positive and significant risk-return tra...

The principles of Markowitz’s portfolio construction model, which requires explicit risk and expected return assumptions, are widely accepted. In practice, however, the most widely used portfolio construction techniques—market-cap weighting and its main rival, fundamental weighting—make no explicit assumptions about these very same risk and return parameters. The most recent departures from mar...

This paper focuses on a nonlinear stochastic model for financial simulation and forecasting based on assumptions of multivariate stochastic correlation, with an application to the European market. We present in particular the key elements of a structured hierarchical econometric model that can be used to forecast financial and commodity markets relying on statistical and simulation methods. The...

The 1998 Survey of Consumer Finance data shows that only 48.8 percent of U.S. households owned stocks, either (i) directly or (ii) indirectly through mutual funds. In addition, there is a close relationship between shareholding and wealth. In 1998, 93 percent of the richest 1 percent of the population owned stocks; the richest 10 percent owned 85 percent of total stocks and mutual funds, compar...

this paper examines regime shifts in tedpix return and volatility and the effects of positive and negative crude oil shocks and gold price fluctuations on stock market shifts behavior using markov switching egarch model with student’s t-distribution. we detect two episodes of series behavior, one relative to low mean/high variance regime namely bear state and the other to high mean/low variance...

An Empirical Re-examination of the Relation Between Firm Size and Return Using a data set in which a strong relation between market value and return is known to exist, this paper fails to nd a signi cant relation between average returns and four other measures of rm size. Furthermore, while market value does provide signi cant additional explanatory power over the single beta model, the same re...