In a financial market where traders are risk averse and short lived, and prices are noisy, asset prices today depend on the average expectation today of tomorrow's price. Thus (iterating this relationship) the date 1 price equals the date 1 average expectation of the date 2 average expectation...

In this paper, we examine if the diversification decisions of individual investors influence asset prices. First, we show that a vast majority of individual investors in our sample are under-diversified and the unexpectedly high idiosyncratic risk in their portfolios results in a welfare loss -...

In this study, we use cross-sectional regressions to estimate the value of the debt-tax shield. Recognizing that debt is correlated with the value of operations along nontax dimensions, we estimate reverse regressions in which we regress future profitability on firm value and debt rather than...

This paper examines the related questions, of the time-series behavior of expected returns and of return predictability, within the framework of the stock-bond pricing model proposed in Mamaysky (2002). The key advantage of the model-based approach adopted in this paper is that the quantities of...

Our working hypothesis is that a professional board which is independent of management should tip the scales in favor of higher returns to investors. Although this hypothesis is amply supported by observation and reasonable assumptions, no detailed analysis of corporate relative performance has...

Saunders (1993) and Hirshleifer and Shumway (2001) document the effect of weather on stock returns. The proposed explanation in both papers is that investor mood affects cognitive processes and trading decisions. In this paper, we use a database of individual investor accounts to examine the...

Many Internet retailers must raise margins in the future if they are to survive. This raises the important issues of whether they will be able to raise margins as well as how valuation estimates made today should evaluate projected changes to margins in the future. In this paper, we describe...

Recent studies by Dhaliwal et al. (2001) and Hanlon, Myers, and Shevlin (2001) raise questions regarding the dividend tax capitalization results in several of my prior studies. In this paper, I clarify the basic concepts underlying dividend tax capitalization and I provide point-by-point...

The consensus of 226 academic financial economists forecasts an arithmetic equity premium of 7% per year over 10 and 30 year horizons; and 6% to 7% over 1 and 5 year horizons. Pessimistic and optimistic 30-year scenario forecasts average 2% and 13%. Respondents claim to revise their forecast...

This article reviews the empirical risk and return statistics from physical real estate and financial real estate investments made in the U.S. over the period 1972-1999. It includes income, capital appreciation, and total returns from business, residential, and farm real estate, as well as REIT...