Since the early nineties, the Dutch tax system allows for a tax-favored form of risk free savings through employer-sponsored savings plans (ESSPs). Under some conditions and up to a certain amount, the contributions to this plan are tax-deductible, and the returns as well as the withdrawals are tax-free. This makes these plans extremely attractive, with real after-tax returns by far exceeding t...

Since the early nineties, the Dutch tax system allows for a tax-favored form of risk free savings through employer-sponsored savings plans (ESSPs). Under certain conditions and up to a certain amount, the contributions to this plan are tax-deductible, and the returns as well as the withdrawals are tax-free. This makes these plans extremely attractive, with real after-tax returns by far exceedin...

Using the restrictions implied by the heteroskedasticity of stock returns, we identify four factors in the U.S. industry returns. The first correlates highly with the market portfolio; the second is a portfolio of stocks that produce investment goods minus stocks that produce consumption goods; the third differentiates between cyclical and noncyclical stocks. The fourth, a portfolio of industri...

Extreme price movements in the financial markets are rare, but important. The stock market crash on Wall Street in October 1987 and other big financial crises such as the Long Term Capital Management and the bankruptcy of Lehman Brothers have attracted a great deal of attention among investors, practitioners and researchers. The recent worldwide financial crisis characterized by the substantial...

Most studies of the predictability of stock and bond returns rely on in-sample tests. In this paper, we test the ability of ten financial variables that have appeared in the extant literature to predict S&P 500 and CRSP equal-weighted stock returns out-of-sample over horizons of 1-10 years. We also test the ability of two financial variables, the term and default spreads, to predict long-term c...

The case for holding real estate in the mixed-asset portfolio is typically made on its stabilising effect as a result of its diversification benefits. However, portfolio diversification often fails when it is most needed, i.e. during periods of financial stress. In these periods, the variability of returns for most asset classes increases thus reducing the stabilising effect of a diversified po...

Federal Reserve Bank of Atlanta E C O N O M I C R E V I E W Second Quarter 2002 D o financial markets offer higher rewards in the form of average returns for holding risks related to recessions and financial distress in addition to the risks from overall market movements? The answer to this question is related to the way financial economists understand the investment world. Fifteen years ago, f...

Whereas many studies in finance have examined and established a strong link between stock returns and information, the physical mechanics of this link have been relatively unexplored. With the advent of stock message boards, it has become feasible to look more closely at the group process by which information impacts prices and vice versa. This paper utilizes a large universe of messages posted...

Article history: Received 29 August 2012 Received in revised form 21 May 2013 Accepted 6 August 2013 Available online 15 August 2013 We test the impact of idiosyncratic risk on stock returns for emerging markets that experience financial market liberalizations. Idiosyncratic risk is positively associated with returns prior to financial market liberalization, but liberalization diminishes this e...