A longstanding controversy in economics and finance is whether financial markets are governed by rational forces or by emotional responses. We study the importance of emotion in the decisionmaking process of professional securities traders by measuring their physiological characteristics, e.g.,...

Several papers study the effect of trust by using the answer to the World Values Survey (WVS) question "Generally speaking, would you say that most people can be trusted or that you can't be too careful in dealing with people?" to measure the level of trust. Glaeser et al. (2000) question the...

We provide an introduction to the use of return based style analysis of Sharpe (1992) in practice. We demonstrate the importance of selecting the right style benchmarks and how the use of inappropriate style benchmarks may lead to wrong conclusions. When style analysis is applied to sector...

We construct measures of the annual cost of single-family housing for 46 metropolitan areas in the United States over the last 25 years and compare them with local rents and incomes as a way of judging the level of housing prices. Conventional metrics like the growth rate of house prices, the...

A long return history is useful in estimating the current equity premium even if the historical distribution has experienced structural breaks. The long series helps not only if the timing of breaks is uncertain but also if one believes that large shifts in the premium are unlikely or that the...

The British North American colonies were the first western economies to rely on legislature-issued paper monies as an important internal media of exchange. This system arose piecemeal. In the absence of banks and treasuries that exchanged paper monies at face value for specie monies on demand,...

The arrival of new, unfamiliar, investment opportunities is often associated with "exuberant" movements in asset prices and real economic activity. During these episodes of high uncertainty, financial markets look at the real sector for signals about the profitability of the new investment...

I extend the Epstein-Zin-lognormal consumption-based asset-pricing model to allow for general i.i.d. consumption growth. Information about the higher moments--equivalently, cumulants--of consumption growth is encoded in the cumulant-generating function. I apply the framework to economies with...

We argue that active management's popularity is not puzzling despite the industry's poor track record. Our explanation features decreasing returns to scale: As the industry's size increases, every manager's ability to outperform passive benchmarks declines. The poor track record occurred before...

We propose two new jump-robust estimators of integrated variance based on high-frequency return observations. These MinRV and MedRV estimators provide an attractive alternative to the prevailing bipower and multipower variation measures. Specifically, the MedRV estimator has better theoretical...