Journal ArticleDOI
Disagreement, Tastes, and Asset Prices
TLDR
The authors provide a simple framework for studying how disagreement and tastes for assets as consumption goods can affect asset prices, and propose a model to estimate the probability distributions of future payoffs on assets.Abstract:
Standard asset pricing models assume that (i) there is complete agreement among investors about probability distributions of future payoffs on assets, and (ii) investors choose asset holdings based solely on anticipated payoffs; that is, investment assets are not also consumption goods. Both assumptions are unrealistic. We provide a simple framework for studying how disagreement and tastes for assets as consumption goods can affect asset prices.read more
Citations
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The stocks at stake: Return and risk in socially responsible investment.
TL;DR: This paper found that socially responsible investing (SRI) impacts on stock returns by lowering the book-to-market ratio and not by generating positive alphas, which is consistent with the theoretical work suggesting that SRI is reflected in demand differences between SRI and non-SRI stock.
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International Tests of a Five-Factor Asset Pricing Model
TL;DR: A five-factor model that adds profitability and investment factors to the three factor model of Fama and French (1993) largely absorbs the patterns in average returns is proposed in this article, which fails to capture fully the low average returns of small stocks whose returns behave like those of low profitability firms that invest aggressively.
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What Factors Drive Global Stock Returns
TL;DR: In this article, the authors show that a multifactor model that includes factor-mimicking portfolios based on momentum and cash flow to price captures significant time series variation in global stock returns, and has lower pricing errors and fewer model rejections than the global CAPM or a popular model that uses size and book-to-market factors.
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The effect of pro-environmental preferences on bond prices: Evidence from green bonds
TL;DR: In this paper, the authors used green bonds as an instrument to identify the effect of non-pecuniary motives, specifically pro-environmental preferences, on bond market prices.
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Costly Arbitrage and the Myth of Idiosyncratic Risk
TL;DR: This article showed that idiosyncratic risk is the single largest cost faced by arbitrageurs and argued that arbitrage costs prevent rational traders from fully eliminating inefficiencies, and that mispricing will only exist to the extent that transaction and holding costs prevent them from completely eliminating inefficiency.
References
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Journal ArticleDOI
Common risk factors in the returns on stocks and bonds
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this article, the authors identify five common risk factors in the returns on stocks and bonds, including three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity.
Journal ArticleDOI
Capital asset prices: a theory of market equilibrium under conditions of risk*
TL;DR: In this paper, the authors present a body of positive microeconomic theory dealing with conditions of risk, which can be used to predict the behavior of capital marcets under certain conditions.
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The Cross‐Section of Expected Stock Returns
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this paper, Bhandari et al. found that the relationship between market/3 and average return is flat, even when 3 is the only explanatory variable, and when the tests allow for variation in 3 that is unrelated to size.
Journal ArticleDOI
On Persistence in Mutual Fund Performance
TL;DR: Using a sample free of survivor bias, this paper showed that common factors in stock returns and investment expenses almost completely explain persistence in equity mutual fund's mean and risk-adjusted returns.
Journal ArticleDOI
Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
TL;DR: In this article, the authors show that strategies that buy stocks that have performed well in the past and sell stocks that had performed poorly in past years generate significant positive returns over 3- to 12-month holding periods.