We cross-sectionally analyze the presence of aggregated hidden depth and trade volume in the S&P 500 and identify its key determinants. We find that the spread is the main predictor for a stock’s hidden dimension, both in terms of traded and posted liquidity. Our findings moreover suggest that...

Standard Fama-French and Carhart models produce economically and statistically significant nonzero alphas even for passive benchmark indices such as the S&P 500 and Russell 2000. We find that these alphas primarily arise from the disproportionate weight the Fama-French factors place on small...

Substantial progress has been made in extending the Black-Scholes model to incorporate such features as stochastic volatility, stochastic interest rates and jumps.On the empirical front, however, it is not yet known whether and by how much each generalized feature will improve option pricing and...

Substantial progress has been made in extending the Black- Scholes model to incorporate such features as stochastic volatility, stochastic interest rates and jumps. On the empirical front, however, it is not yet known whether and by how much each generalized feature will improve option pricing...

This article empirically analyzes some properties shared by all one-dimensional diffusion option models. Using S&P 500 options, we find that when sampled intraday (or inter-day), (i) call (put) prices often go down (up) even as the underlying price goes up, and (ii) call and put prices often...

Recent empirical studies find that once an option pricing model has incorporated stochastic volatility, allowing interest rates to be stochastic does not improve pricing or hedging any further while adding random jumps to the modeling framework only helps the pricing of extremely short-term...

Arguments for creating a market to allow trading the portfolio of all endowments in the entire world, the "market portfolio," are considered. This world share market would represent a radical innovation, since at the present time only a small fraction of world endowments are traded. Using a...

We show empirically that survey-based measures of expected inflation are significant and strong predictors of future aggregate stock returns in several industrialized countries both in-sample and out-of-sample. By empirically discriminating between competing sources of this return predictability...

There is consensus that the recent nancial crisis revolved around a crash of the short-term credit market. Yet there is no agreement around the necessary policies to prevent another credit freeze. In this experiment we test the eects that contract length (i.e. maturity mismatch) has on the...

One popular approach for nonstructural economic and financial forecasting is to include a large number of economic and financial variables, which has been shown to lead to significant improvements for forecasting, for example, by the dynamic factor models. A challenging issue is to determine...