FIN
395.4 Empirical Methods in Finance
Syllabus
This course represents an advanced study of asset pricing in financial economics. We focus on the empirical techniques used most often in the analysis of financial markets and how they are applied to actual market data. The list of topics includes: (a) empirical tests of Asset Pricing Models b) statistical properties of asset returns, (b) unconditional tests of asset pricing models (CAPM, APT), (c) conditional tests of asset pricing models (d) efficient markets hypothesis and anomalies, (d) behavioral finance, (e) mutual fund and fund flows, (f) international finance, and (g) miscellaneous topics. The relative emphasis that each topic receives within category (d-g) will likely depend on the interests of the students.
2. Class Meetings and Format
We will meet each Tuesday and Thursday 3-6 pm. Each week, I will assign relevant readings. These readings will consist of statistical background readings at times and specific papers in empirical financial economics. You are expected to read the material before the class. The class will not follow a lecture format; rather, I will act as the discussion leader and background resource, especially as it comes to techniques or methodology. I will attempt to devise a list of discussion questions each week to facilitate the presentation of each topic. In addition, I will assign an empirical exercise applying a concept or technique from class that requires the use of a statistical package on a common dataset. I would encourage you to form study groups to discuss the papers, data assignments and project.
3. Course Resources and Requirements
The textbooks for the course is The Econometrics of Financial Markets by John Campbell, Andrew Lo and Craig MacKinlay (Princeton University Press, 1997). Chapters of Asset Pricing by John H. Cochrane are also recommended and Ch. 1-9 is assumed as background material. I will also assign required readings which are listed in the outline below. I will strive to make available as many of the supplemental (non-required) readings as possible.
The demands of this course are
likely to be computation-intensive so that some rudimentary programming
and data analysis skills are necessary.
4. Grades
A. Pop Quizes, data assignments, and class discussion. (35 percent)
B. Research Paper. Research ideas. Students are expected to come up with research ideas from the readings. More details provided in class. (15 percent)
C. Final Examination. This exam will take place during the scheduled time in the 11th week of the quarter and will last 2 hours. It is designed to act as a dry-run test for the Finance Theory exam. (35 percent)
D. Classroom Presentation. Students are expected to participate actively in all classroom discussions. However, each student will act as discussion leader for one of the special topics sessions (selected in consultation with the instructor) in the 13 and 14th weeks of the semester. The presentation should comprise a critical review of the articles selected. (15 percent)
5. Background References
Students should also avail themselves of the following useful reference books:
Parts of this course are similar to in nature to that from Andrew Karolyi. He designed the coures by seeking input from professors teaching in the top doctoral programs in the U.S. (Professors Tim Bollerslev, Peter Bossaerts, John Campbell, K.C. Chan, Wayne Ferson, Ravi Jagannathan, Bob Korajczyk, Andrew Lo and Jay Shanken). He surveyed a group of faculty that comprise the best empirical researchers in Finance as to the content and format of the Ph.D-level courses in empirical methods they teach. Their incentive to comply with the survey lay in a promise to pool and then disseminate the information to them.
The topics covered in the course are divided into 14 sections, as outlined below. We will cover topic I to X comprehensively in class. I will encourage the students to choose a topic from (IX to XV) for their presentations which will take place during the final week of the quarter.
I. Asset Pricing Theory (Ch. 1-10 from Cochrane's on-line text).
II. Introduction to Empirical Characteristics
III. The Random Character of Stock Market Prices
(a) Unconditional Distributions
(b) Conditional Distributions
i. Conditional Means - Mean Reversion
ii. Conditional Means - Instrumental Variables
iii. Conditional Variances
iv. Relationship between Means and Variances
(c) Stock Prices and Volume
IV. Capital Asset Pricing Model
(a) Unconditional Tests
(b) Conditional Tests - Time Varying Means/Variances
V. Arbitrage and Multifactor Asset Pricing Models
(a) Unconditional Tests
(b) Conditional Tests
VI. Consumption and Production Based Asset Pricing Models
(a) Consumption Based Models
(b) State Nonseparable Consumption Models
(c) Habit Formation Models
(d) Production Based Models
VII. Efficient Markets Hypothesis
(a) Variance Bounds Tests
(b) Anomalies
(b) Cross-Asset Relationships and Under/Overreaction Hypotheses
VIII. Behavioral Finance
(a) Theoretical papers
IX. International Finance
(a) International Asset Pricing
(b) Exchange Rate Exposure
(c) Other issues
X. Portfolio Performance Evaluation
XI. Market Microstructure
(a) Institutional Aspects
(b) Measurement Biases
(c) Bid-Ask Spreads and Price Discreteness
XII. Event Study Methodology
(a) Traditional Approaches
(b) Long-run Returns Measurement
XIII. Fixed Income Securities
(a) Term Structure of Interest Rates
(b) Pricing Debt with Default Risk
XIV. Pricing Options, Futures and Other Derivative Assets
(a) Option Pricing Models
(b) Futures and Forward Prices
7. References
The references below are classified into three categories: (r) denotes a required reading that will be discussed in class, (s), a supplemental reading, and (m) represents a background methodological article that students may attempt to read.
(s) Campbell, John Y., 2000, "Asset Pricing at the New Millennium," Journal of Finance 55, 1515-1568.
(s) Merton, R. C., 1973, “An intertemporal capital asset pricing model,” Econometrica 41, 867-887.
(s) Ross, S. A., 1976, “The arbitrage theory of capital asset pricing,”
Journal of Economic Theory 13, 341-360.
(r) Cochrane, John, 2002, Stocks as Money: Convenience Yield and the Tech-Stock Bubble.
(r) Campbell, J., A. Lo and C. MacKinlay, 1997, "Chapter 1: Introduction" in The Econometrics of Financial Markets. Focus on Sections 1.1 to 1.4
(s) Cox, D., 1990, "Role of Models in Statistical Analysis," Statistical Science 5, 169-74.
(s) Duhem, Pierre, 1987, "Physical Theory and Experiment," In: Kourany, J.(ed.), "Scientific Knowledge," 158-169.
(r) McCloskey, 1985, "The Loss Function has been Mislaid: The Rhetoric of Significance Tests," American Economic Review 75, 201-205.
(s) Popper, Karl, 1987, "Science: Conjectures and Refutations," In: Kourany, J.(ed.), "Scientific Knowledge," 139-155.
(r) Leamer, E., 1983, "Let's Take the Con Out of Econometrics," American Economic Review 73, 31-43.
(m) Silvey, S. D., 1975, Statistical Inference, Chapter 1. London:
Chapman and Hall.
A. Unconditional Distributions
(s) Bachelier, L., 1900, "Theorie de la Speculation," Annales de l'Ecole Normale Superieure 3, Gauthier-Villars, Paris.
(s) Blattberg, R. and N. Gonedes, 1974, "A Comparison of the Stable and Student Distributions as Statistical Models for Stock Prices," Journal of Business 47, 244-280.
(s) Cootner, P., ed., 1964, The Random Character of Stock Market Prices, Cambridge, MA: MIT Press.
(r) Fama, E., 1976, Foundations of Finance. New York: Basic Books. Chapters 1 and 2.
(s) Fama, E., 1965, "The Behavior of Stock Prices," Journal of Business 38, 34-105.
(s) Harris, L., 1986, "A Transactions Data Study of Weekly and Intradaily Patterns in Stock Returns," Journal of Financial Economics 16, 99-117.
(s) Kon, S., 1984, "Models of Stock Returns: A Comparison," Journal of Finance 39, 148-165.
B.1 Conditional Means - Mean Reversion
(s) Boudoukh, J., M. Richardson and R. Whitelaw, 1994, "A Tale of Three Schools: Insights on Autocorrelations of Short-Horizon Stock Returns," Review of Financial Studies 7, 539-573.
(r) Campbell, J., A. Lo and C. MacKinlay, 1993, "Chapter 2: Predictability of Asset Returns" in The Econometrics of Financial Markets.
(m) Hamilton, J., 1994, Time Series Analysis, Chapter 1-2.
(s) Conrad, J. and G. Kaul, 1988, "Time Variation in Expected Returns," Journal of Busines, 409-426.
(s) Fama, E. and K. French, 1988, "Permanent and Temporary Components of Stock Prices," Journal of Political Economy 96, 246-273.
(s) Kim, M., C. Nelson, and R. Startz, 1991, "Mean Reversion in Stock Prices: Evidence and Implications," Review of Economic Studies 58, 515-528.
(s) Lo, A., 1991, "Long-Term Memory in Stock Market Prices," Econometrica 59, 1279-1313.
(s) Lo, A. and C. MacKinlay, 1988, "Stock Market Prices Do Not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies 1, 41-66.
(s) Poterba, J. and L. Summers, 1988, "Mean Reversion in Stock Returns: Evidence and Implications," Journal of Financial Economics 22, 27-60.
(s) Richardson, M. and J. Stock, 1990, "Drawing Inferences From Statistics Based on Multiyear Asset Returns," Journal of Financial Economics 25, 323-348.
(s) Kandel, S. and R. Stambaugh, 1996, "On the Predictability of Stock Returns: An Asset Allocation Perspective," Journal of Finance 51, 385-424.
(m) Dickey, D. and W. Fuller, 1981, "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root" Econometrica 49, 1057-1072.
(m) Hamilton, J., 1994, Time Series Analysis, Chapter 17.
(m) Lo, A. and C. MacKinlay, 1989, "The Size and Power of the Variance Ratio Test in Finite Samples: A Monte Carlo Investigation," Journal of Econometrics 40, 203-238.
(m) Schwert, G., 1989, "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business and Economics Statistics 7, 147-160.
B.2 Conditional Means - Instrumental Variables
(s) Cremers, Martijn, 2002, “Stock Return Predictability: A Bayesian Model Selection Perspective,” Review of Financial Studies, Vol. 15, No. 4, 1223-1249.
(r) Bossaerts, P., and P. Hillion, 1999, "Implementing Statistical Criteria to Select Return Forecasting Models: What Do We Learn?" Review of Financial Studies 12, 405-428.
(r) Fama, E. and K. French, 1988, "Dividend Yields and Expected Stock Returns," Journal of Financial Economics 22, 3-26.
(r) Fama, E. and K. French, 1989, "Business Conditions and Expected Returns on Stocks and Bonds," Journal of Financial Economics 25, 23-50.
(s) Fama, E. and M. Gibbons, 1982, "Inflation, Real Returns and Capital Investment," Journal of Monetary Economics 9, 297-323.
(s) Fama, E. and W. Schwert, 1977, "Asset Returns and Inflation," Journal of Financial Economics 5, 115-146.
(s) Keim, D. and R. Stambaugh, 1986, "Predicting Returns in the Stock and Bond Markets," Journal of Financial Economics 17, 357-390.
B.3 Conditional Variances
(s) Akgiray, V., 1989, "Conditional Heteroscedasticity in Time Series of Stock Returns," Journal of Business 62, 55-80.
(s) Bollerslev, T., 1986, "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," Review of Economics and Statistics 69, 542-547.
(s) Campbell, J., A. Lo and C. MacKinlay, 1993, "Chapter 12: Nonlinearities in Financial Data" in The Econometrics of Financial Markets. Sections 12.1 and 12.2 only.
(s) Christie, A., 1982, "The Stochastic Behavior of Common Stock Variances: Value, Leverage and Interest Rate Effects," Journal of Financial Economics 10, 407-432.
(s) French, K. and R. Roll, 1986, "Stock Return Variances: The Arrival of Information and the Reaction of Traders," Journal of Financial Economics 17, 5-26.
(s) Pagan, A. "The Econometrics of Financial Markets" Journal of Empirical Finance 3, 15-102.
(s) Pagan, A. and G. Schwert, 1990, "Alternative Models for Conditional Stock Volatility," Journal of Econometrics 45, 267-290.
(s) Schwert, G., 1990, "Why Does Stock Market Volatility Change Over Time," Journal of Finance 44, 1115-1153.
(m) Bollerslev, T., 1986, "Generalized Autoregressive Conditional Heteroscedasticity," Journal of Econometrics 31, 307-327.
(m) Bollerslev, T., Chou, R. and K.Kroner, 1990, "ARCH Modeling in Finance: A Review of the Theory and Empirical Evidence," Journal of Econometrics 52, 5-59.
(m) Engle, R., 1982, "Autoregressive Conditional Heteroskedasticity with Estimates of the Variance of U.K. Inflation," Econometrica 50, 987-1008.
(m) Hamilton, J., 1994, Time Series Analysis, Chapter 21.
B.4 Relationship between Conditional Means and Variances
(s) French, K., Schwert, W. and R. Stambaugh, 1987, "Expected Stock Returns and Volatility," Journal of Financial Economics 19, 3-30.
(s) Hamao Y., R. Masulis and V. Ng, 1990, "Correlations in Price Changes and Volatility Across International Stock Markets," Review of Financial Studies 3, 281-307.
(s) Merton, R., 1980, "On Estimating the Expected Return on the Market," Journal of Financial Economics 8, 323-362.
(s) Nelson, D., 1991, "Conditional Heteroscedasticty in Asset Returns:A New Approach," Econometrica 59, 347-370.
(m) Chou, R., 1988, "Volatility Persistence and Stock Valuations," Journal of Applied Econometrics 3, 279-294.
(m) Pagan, A. and A. Ullah, 1988, "The Econometric Analysis of Models with Risk Terms," Journal of Applied Econometrics 3, 87-105.
C. Stock Returns and Volume
(s) Andersen, T., 1996, "Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Volatility," Journal of Finance 51, 169-203.
(s) Campbell, J., Grossman, S. and J. Wang, 1993, "Trading Volume and Serial Correlation," Quarterly Journal of Economics 108, 905-939.
(s) Gallant, R., Rossi, P. and G. Tauchen, 1992, "Stock Prices and Volume," Review of Financial Studies 5, 199-242.
(s) Harris, L., 1987, "Transactions Data Tests of the Mixture of Distributions Hypothesis," Journal of Financial and Quantitative Analysis 22, 127-141.
(s) Jones, C., G. Kaul and M. Lipson, "Transactions, Volume and Volatility," Review of Financial Studies 7, 631-651.
(s) Karpoff, J., 1987, "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis 22, 109-126.
(s) Lamoureux, C. and W. Lastrapes, 1990, "Heteroscedasticity in Stock Return Data: Volume vs. GARCH Effects," Journal of Finance 46, 221-229.
(s) Tauchen, G. and M. Pitts, 1983, "The Price Variability-Volume Relationship on Speculative Markets," Econometrica 51, 485-505.
(s) Westerfield, R., 1977, "The Distribution of Common Stock Price Changes:
An Application of Transactions Time and Subordinated Stochastic Models,"
Journal of Financial and Quantitative Analysis 12, 743-765.
(s) Chan, Kalok, and Fong,
Wai-Ming, 2000, "Trade size, order imbalance, and the volatility-volume relation," Journal of Financial
Economics 57, 247-273.
(r) Campbell, J., A. Lo and C. MacKinlay, 1993, "Chapter 5: The Capital Asset Pricing Model" in The Econometrics of Financial Markets.
(r) Cochrane (Ch 12)
(r) Black, F., Jensen, M. and M. Scholes, 1972, "The Capital Asset Pricing Model: Some Empirical Tests," in M. Jensen ed., Studies in the Theory of Capital Markets. New York: Praeger.
(s) Fama, E., 1976, Foundations of Finance. New York: Basic Books. Chapter 9.
(r) Fama, E. and J. MacBeth, 1973, "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy 91, 607-636.
(s) Kan, R. and C. Zhang, 1999, "Two-Pass Tests of Asset Pricing Models with Useless Factors" forthcoming Journal of Finance.
(r) Fama, E. and K. French, 1992, "The Cross-Section of Expected Stock Returns," Journal of Finance 47, 427-465.
(s) Gibbons, M., 1982, "Multivariate Tests of Financial Models: A New Approach," Journal of Financial Economics 10, 3-27.
(s) Gibbons, M., Ross, S. and J. Shanken, 1989, "A Test of the Efficiency of a Given Portfolio," Econometrica 57, 1121-1152.
(s) Huberman, G. and S. Kandel, 1988, "Mean-Variance Spanning," Journal of Finance 43, 873-888.
(s) Kandel, S., 1985, "The Likelihood Ratio Test Statistic of Mean-Variance Efficiency of a Given Portfolio," Journal of Financial Economics 13, 575-592.
(s) Kothari, S., J. Shanken and R. Sloan, "Another Look at the Cross-section of Expected Stock Returns," Journal of Finance.
(s) Lo, A. and C. MacKinlay, 1990, "Data Snooping Biases in Tests of Financial Asset Pricing Models," Review of Financial Studies 3, 431-468.
(s) MacKinlay, C., 1987, "On Multivariate Tests of the CAPM," Journal of Financial Economics 18, 341-371.
(s) Roll, R., 1977, "A Critique of the Asset Pricing Theory's Tests Part 1: On Past and Potential Testability of the Theory," Journal of Financial Economics 4, 129-176.
(s) Shanken, J., 1985, "Multivariate Tests of the Zero-Beta CAPM," Journal of Financial Economics 14, 327-348.
(m) Anderson, T., 1984, An Introduction to Multivariate Statistical Analysis, New York: John Wiley and Sons, Chapter 5.
(m) Buse, A., 1982, "The Likelihood Ratio, Wald and Lagrange Multiplier Tests: An Expository Note," American Statistician 36, 153-157.
B. Conditional Tests with Time Varying Means and Variances
(s) Bollerslev, T., R. Engle and J. Wooldridge, 1988, "A Capital Asset Pricing Model with Time Varying Covariances," Journal of Political Economy 96, 116-131.
(s) Chan, K.C., G.A. Karolyi and R. Stulz, 1992, "Global Financial Markets and the Risk Premium on U.S. Equity," Journal of Financial Economics 32, 137-168.
(s) Ferson, W., S. Kandel and R. Stambaugh, 1987, "Tests of Asset Pricing with Time-Varying Expected Risk Premiums and Market Betas," Journal of Finance 42, 201-220.
(s) Ferson, W., S. Foerster, and D. Keim, 1993, "General Tests of Latent Variable Models and Mean-Variance Spanning," Journal of Finance 48, 131-155.
(s) Gibbons, M. and W. Ferson, 1985, "Testing Asset Pricing Models with Changing Expectations and an Unobservable Market Portfolio," Journal of Financial Economics 14, 217-236.
(r) Harvey, C., 1989, "Time Varying Conditional Covariances in Tests of Asset Pricing Models," Journal of Financial Economics 24, 289-317.
(s) Harvey, C., 1991, "The World Price of Covariance Risk," Journal of Finance 46,111-157.
(r) Campbell, J., A. Lo and C. MacKinlay, 1993, "Appendix A.2 and A.4: Generalized Method of Moments and Maximum Likelihood" in The Econometrics of Financial Markets. ) Campbell, J., A. Lo and C. MacKinlay, 1993, "Appendix A.2 and A.4: Generalized Method of Moments and Maximum Likelihood" in The Econometrics of Financial Markets.
(m) Duffie, D. and K. Singleton, 1993, "Simulated Moments Estimation of Markov Models of Asset Prices," Econometrica 61, 929-952.
(s) Hansen, L., 1982, "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica 50, 1029-1054.
(r) Ogaki, Masao, 1993, Generalized
Method of Moments: Econometric Applications, Handbook of Statistics,
Vol 11.
(r) Cochrane, GMM sections (Ch. 9-11).
(m) Hansen, L. and K. Singleton, 1982, "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica 50, 1269-1286. (Errata in Volume 52, 267-268.)
(m) Hamilton, J., 1994, Time Series Analysis, Chapter 14.
(r) Campbell, J., A. Lo and C. MacKinlay, 1993, "Chapter 6: Multifactor Pricing Models" in The Econometrics of Financial Markets.
(r) Ferson, W., 1994, "Theory and Empirical Testing of Asset Pricing Models," in The Finance Handbook, Jarrow, R., W. Ziemba and V. Maksimovic, (eds), North-Holland Publishers.
A. Unconditional Tests
(r) Chan, K.C., N. Chen and D. Hsieh, 1985, "An Exploratory Investigation of the Firm Size Effect," Journal of Financial Economics 14, 451-471.
(r) Fama, Eugene F., and Kenneth R. French, 1993, Common risk factors in the returns on stocks and bonds, Journal of Financial Economics 33, 3-56.
(s) Chen, N., 1983, "Some Empirical Tests of Arbitrage Pricing," Journal of Finance 38, 1393-1414.
(s) Chen, N., Roll, R. and S. Ross, 1986, "Economic Forces and the Stock Market: Testing the APT and Alternative Asset Pricing Theories," Journal of Business 59, 383-403.
(s) Connor, G. and R. Korajczyk, 1988, "Risk and Return in an Equilibrium APT: Application of a New Test Methodology," Journal of Financial Economics 21, 255-289.
(s) Dhrymes, P., Friend, I., Gultekin, B. and M. Gultekin, 1984, "A Critical Reexamination of the Empirical Evidence on the Arbitrage Pricing Theory," Journal of Finance 39, 323-346.
(s) Dybvig, P. and S. Ross, 1985, "Yes, the APT is Testable," Journal of Finance 40, 1173-1188.
(s) Huberman, G., S. Kandel and R. Stambaugh, 1987, "Mimicking Portfolios and Exact Arbitrage Pricing," Journal of Finance 42, 1-10.
(s) Lehmann, B. and D. Modest, 1988, "The Empirical Foundations of the Arbitrage Pricing Theory," Journal of Financial Economics 21, 213-254.
(s) Roll, R. and S. Ross, 1980, "An Empirical Investigation of the Arbitrage Pricing Theory," Journal of Finance 35, 1073-1103.
(s) Roll, R. and S. Ross, 1984, "A Critical Reexamination of the Empirical Evidence on the Arbitrage Pricing Theory: A Reply," Journal of Finance 39, 347-350.
(s) Shanken, J., 1982, "The Arbitrage Pricing Theory: Is It Testable?" Journal of Finance 37, 1129-1140.
(s) Shanken, J., 1985, "Multi-Beta CAPM or Equilibrium APT?: A Reply," Journal of Finance 40, 1189-1196.
(s) Shukla, R. and C. Trzcinka, 1990, "Sequential Tests of the Arbitrage Pricing Theory: A Comparison of Principal Components and Maximum Likelihood Factors," Journal of Finance 45, 1541-1564.
(s) Trzcinka, C., 1986, "On the Number of Factors in the Arbitrage Pricing Model," Journal of Finance 41, 347-368.
(m) Anderson, T., 1984, An Introduction to Multivariate Statistical Analysis, New York: John Wiley and Sons, Chapter 11 and 14.
B. Conditional Tests and Extensions
(s) Bansal, R. and S. Viswanathan, 1993, "No Arbitrage and Arbitrage Pricing: A New Approach," Journal of Finance 48, 1231-1261.
(s) Bansal, R., D. Hsieh, and S. Viswanathan, 1993, "A New Approach to International Arbitrage Pricing," Journal of Finance 48, 1719-1747..
(s) Chan, L., J. Karceski and J. Lakonshok, 1998, "The Risk and Return from Factors" Journal of Financial and Quantitative Analysis 33, 159-187.
(s) Connor, G. and R. Korajczyk, 1992, "The Arbitrage Pricing Theory and Multifactor Models of Asset Returns," working paper, Northwestern University, Sections IV - VI.
(r) Ferson, W. and C. Harvey, 1991, "The Variation of Economic Risk Premiums," Journal of Political Economy 99, 385-415.
(s) Ghysels, E., 1998, "On Stable Factor Structures in the Pricing of Risk: Do Time-Varying Betas Help or Hurt?" Journal of Finance 53, 549-573.
(s) Jagannathan, R. and Z. Wang, 1996, "The Conditional CAPM and the Cross-Section of Expected Returns," Journal of Finance 51, 3-54.
(s) Jagannathan, R. and Z. Wang, 1998, "An Asymptotic Theory for Estimating Beta-Pricing Models Using Cross-sectional Regression," Journal of Finance 53, 1285-1309.
(r) Campbell, J., A. Lo and C. MacKinlay, 1993, "Chapter 8: Intertemporal Equilibrium Models" in The Econometrics of Financial Markets.
A. Consumption Based Models
(s) Breeden, D., Gibbons, M. and R. Litzenberger, 1989, "Empirical Tests of the Consumption Oriented CAPM", Journal of Finance 44, 231-262.
(s) Brown, D. and M. Gibbons, 1985, "A Simple Econometric Approach for Utility-Based Asset Pricing Models," Journal of Finance 40, 359-381.
(s) Cecchetti, S., P.S. Lam and N. Mark, 1994, "Testing Volatility Restrictions on Intertemporal Marginal Rates of Substitution Implied by Euler Equations and Asset Returns," Journal of Finance 49, 123-152.
(s) Ferson, W. and C. Harvey, 1992, "Seasonality and Consumption-based Asset Pricing," Journal of Finance 47, 511-552.
(s) Grossman, S., A. Melino and R. Shiller, 1987, "Estimating the Continuous Time Consumption Based Asset Pricing Model," Journal of Business and Economic Statistics 5, 315-327.
(s) Hansen, L. and R. Jagannathan, 1992, "Assessing Specification Errors in Stochastic Discount Factor Models," Journal of Finance 52, 557-590.
(s) Hansen, L. and K. Singleton, 1982, "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica 50, 1269-1286.
(s) Hansen, L. and K. Singleton, 1983, "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy 91, 249-265.
(s) Hansen, L. and R. Jagannathan, 1991, "Implications of Security Market Data for Models of Dynamic Economies," Journal of Political Economy 99, 225-262.
B. State Nonseparable Preferences
(s) Epstein, L. and S. Zin, 1989, "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica 57, 937-969.
(s) Epstein, L. and S. Zin, 1991, "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy 99, 263-286.
C. Habit Formation Models
(s) Mehra, R. and E. Prescott, 1985, "The Equity Premium Puzzle," Journal of Monetary Economics 15, 145-161.
(s) Ferson, W. and G. Constantinides, 1991, "Habit Persistence and Durability in Aggregate Consumption: Empirical Tests," Journal of Financial Economics 29, 199-240.
(s) Heaton, J., 1994, "An Empirical Investigation of Asset Pricing with Temporally Dependent Preference Specifications," Econometrica 62, 801-817 .
D. Production Based Models
(s) Cochrane, J., 1991, "Production-based Asset Pricing and the Link
between Stock Returns and Economic Fluctuations," Journal of Finance 46,
207-234.
(s) Fama, E., 1976, Foundations of Finance. New York: Basic Books. Chapter 5.
(s) Fama, E., 1970, "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance 25, 383-417.
(s) Fama, E., 1991, "Efficient Capital Markets: II," Journal of Finance 46, 1575-1617.
(s) Grossman, S., 1989, The Informational Role of Prices. Cambridge: MIT. Press.
(s) Grossman, S. and J. Stiglitz, 1980, "On the Impossibility of Informationally Efficient Markets," American Economic Review 70, 393-408.
A. Variance Bounds Tests
(s) Ackert, L. and B. Smith, 1993, "Stock Price Volatility, Ordinary Dividends, and Other Cash Flows to Shareholders," Journal of Finance 48, 1147-1159.
(s) Bollerslev, T. and R. Hodrick, 1992, "Financial Market Efficiency Tests," in The Handbook of Applied Econometrics, I, Macroeconomics, M. Pesaran and R. Wickins (eds), North-Holland Publishers.
(r) Campbell, J., A. Lo and C. MacKinlay, 1993, "Chapter 7: Present Value Relations" in The Econometrics of Financial Markets.
(s) Shiller, R., 1981, "Do Stock Prices Move Too Much To Be Justified By Subsequent Changes in Dividends?" American Economic Review 71, 421-436.
(s) Campbell, J. and R. Shiller, 1987, "Co-integration and Tests of Present Value Models," Journal of Political Economy 95, 1062-1088.
(s) Flavin, M., 1983, "Excess Volatility in the Financial Markets: A Reassessment of the Empirical Evidence," Journal of Political Economy 91, 929-956.
(s) Kleidon, A., 1986, "Variance Bounds Tests and Stock Price Valuation Models," Journal of Political Economy 94, 953-1001.
(s) Kothari, S. and J. Shanken, 1992, "Stock Return Variation and Expected Dividends: A Time-Series and Cross-Sectional Analysis," Journal of Financial Economics 31, 177-210.
(s) Lee, Bong-Soo, 1998, "Permanent, Temporary and Non-Fundamental Components of Stock Prices" Journal of Financial and Quantitative Analysis 33, 1-32.
(s) LeRoy, S., 1989, "Efficient Capital Markets and Martingales," Journal of Economic Literature 27, 1583-1621.
(s) LeRoy, S. and R. Porter, 1981, "The Present Value Relation: Tests Based on Variance Bounds," Econometrica 49, 555-574.
(s) Marsh, T. and R. Merton, 1986, "Dividend Variability and Variance Bounds Tests for the Rationality of Stock Market Prices," American Economic Review 76, 483-498.
(s) West, K., 1988, "Dividend Innovations and Stock Price Volatility," Econometrica 56, 37-61.
(m) Engle, R. and C. Granger, 1987, "Co-Integration & Error Correction: Representation, Estimation and Testing," Econometrica 55, 251-276.
(m) Hamilton, J., 1994, Time Series Analysis, Chapter 17.
(m) Johansen, S., 1988, "Statistical Analysis of Cointegrating Vectors," Journal of Economics, Dynamics and Control 12, 231-254.
(m) Johansen, S., 1991, "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica 59, 1551-1581.
B. Anomalies
(s) Banz, R., 1981, "The Relationship Between Return and Market Value of Common Stock," Journal of Financial Economics 9, 3-18.
(s) Keim, D., 1983, "Size-Related Anomalies and Stock Return Seasonality: Further Empirical Evidence," Journal of Financial Economics 12, 13-32.
(s) Lakonishok, J. and S. Smidt, 1988, "Are Seasonal Anomalies Real? A Ninety-Year Perspective," Review of Financial Studies 1, 403-427.
(s) Reinganum, M., 1981, "Misspecification of Capital Asset Pricing: Empirical Anomalies Based on Earnings Yields and Market Values," Journal of Financial Economics 9, 19-46.
(s) Rosenberg, B., Reid, K. and R. Lanstein, 1985, "Persuasive Evidence of Market Inefficiency," Journal of Portfolio Management 12, 9-16.
(s) DeBondt, W. and R. Thaler, 1985, "Does the Stock Market Overreact?" Journal of Finance 40, 793-805.
(s) Loughran, T., and J. R. Ritter, 1996, “Long-term market overreaction: The effect of low-priced stocks,” Journal of Finance 51, 1959-1970.
(s) DeBondt, W. and R. Thaler, 1987, "Further Evidence of Investor Overreaction and Stock Market Seasonality," Journal of Finance 42, 557-581.
(r) Jegadeesh, N. and S. Titman, 1993, "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance 48, 65-91.
(s) Arbanell, J. and V. Bernard, 1992, "Tests of Analysts' Overreaction/Underreaction to Earnings Information as an Explanation for Anomalous Stock Price Behavior," Journal of Finance 47, 1181-1207.
(s) Badrinath, S., J. Kale, and T. Noe, 1995, "Of Shepherds, Sheep and the Cross-autocorrelation in Equity Returns" Review of Financial Studies 8, 401-430.
(s) Ball, R. and S. Kothari, 1989, "Nonstationary Expected Returns: Implications for Tests of Market Efficiency and Serial Correlation in Returns," Journal of Financial Economics 25, 51-74.
(s) Chan, K.C., 1988, "On the Contrarian Investment Strategy," Journal of Business 61, 147-163.
(s) Chan, L., N. Jegadeesh, and J. Lakonishok, 1996, "Momentum Strategies" Journal of Finance 51, 1681-1713.
(s) Chopra, N., Lakonishok, J. and J. Ritter, 1992, "Measuring Abnormal Performance: Do Stocks Overreact?" Journal of Financial Economics 31, 235-268.
(s) Lehmann, B., 1990, "Fads, Martingales, and Market Efficiency," Quarterly Journal of Economics 105, 1-28.
(s) Lo, A. and C. MacKinlay, 1990, "When Are Contrarian Profits Due to Stock Market Overreaction?" Review of Financial Studies 3, 175-207.
(s) Jegadeesh, N., 1990, “Evidence of predictable behavior of security returns,” Journal of Finance 45, 881-898.
(s) Zarowin, P., 1990, "Size, Seasonality and Stock Market Overreaction," Journal of Financial and Quantitative Analysis 25, 113-125.
(r) Jegadeesh, N. and S. Titman, 2001, "Profitability of Momentum Strategies: An Evaluation of Alternative Explanations." Journal of Finance.
(r) Grinblatt, M. and T. Moskowitz, 2003 "Predicting Stock Price Movements from Past Returns: The Role of Consistency and Tax-Loss Selling" forthcoming Journal of Financial Economics.
(r) Griffin, John, Susan Ji, and Spencer Martin, 2003, "Momentum Investing and Business Cycle Risk: Evidence from Pole to Pole", December Journal of Finance.
(s) Korajczyk, R. and R. Sadka, 2003, “Are Momentum Profits Robust to Trading Costs?” Journal of Finance, forthcoming.
D. Size, BE/ME and Overreaction
(r) Lakonishok, J., A. Shleifer and R. Vishny, 1994, "Contrarian Investment, Extrapolation and Risk," Journal of Finance 49, 1541-1578.
(s) Fama, E. and K. French, 1996, "Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance 51, 55-83.
(r) Daniel, K., and S. Titman, 1997, “Evidence on the characteristics of cross-sectional variation in stock returns,” Journal of Finance 52, 1-33.
(s) Davis, J., E. F. Fama, and K. R. French, 1998, “Characteristics, covariances, and average returns: 1929-1997,” working paper, Kansas State University.
(s) Berk, J. B., 1998, “Sorting out sorts,” Forthcoming in the Journal of Finance.
(s) Kothari, S. P., J. Shanken, and R. G. Sloan, 1995, “Another look at the cross-section of expected stock returns,” Journal of Finance 50, 185-224.
(s) La Porta, R., 1996, “Expectations and the cross-section of stock returns,” Journal of Finance 51, 1715-1742.
(s) La Porta, R., J. Lakonishok, A. Shleifer, and R. Vishny, 1997, “Good news for value stocks: further evidence on market efficiency,” Journal of Finance 52, 859-874.
(s) Loughran, T., 1997, “Book-to-market across firm size, exchange, and seasonality: Is there an effect?” Journal of Financial and Quantitative Analysis 32, 249-268.
(s) Berk, J. B., 1995, “A critique of size related anomalies,” Review of Financial Studies 8, 275-286.
(s) Chan, L. K. C., N. Jegadeesh, and J. Lakonishok, 1995, “Evaluating the performance of value versus glamour stocks: The impact of selection bias,” Journal of Financial Economics 38, 269-296.
(s) Daniel, K., D. Hirshleirfer, and A. Subrahmanyam, 1997, “Investor overconfidence, risk, and predictors of security returns,” working paper, Northwestern University.
(s) Davis, J., 1994, “The cross-section of realized stock returns: The pre-Compustat evidence,” Journal of Finance 49, 1579-1593.
(r) Fama, E. F., and K. R. French, 1995, “Size and book-to-market factors in earnings and returns,” Journal of Finance 50, 131-155.
(s) Fama, E. F, and K. R. French, 1998, “Value versus growth: The international evidence,” forthcoming in the Journal of Finance.
(s) Graham, B., and D. Dodd, 1934, Security Analysis, McGraw-Hill, New York.
(s) Haugen, R., 1995, “The new finance: The case against efficient markets,” (Prentice Hall, Englewood Cliffs, New Jersey.)
(r) Griffin, J. and M. Lemmon, "Does Book-to-Market Equity proxy for Distress or Overreaction?" , Journal of Finance.
(r) De Bondt Werner, and Richard H. Thaler, 1990, "Do Security Analysts Overreact?" American Economic Review Papers and Proceedings 80(2), 52-57.
(s) Hong, Harrison, and Jeffrey D. Kubik, 2003, "Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts", Journal of Finance 58, 313-351.
(s) Casella, G. and E. I. George, 1992, Explaining the Gibbs Sampler, The American Statistician 46, 167-174.
(r) Pastor, Lubos and Robert F. Stambaugh, 2002, Mutual fund performance and seemingly unrelated assets, Journal of Financial Economics 63, 315--349.
A) Mostly Theoretical
(s) DeLong, J. Bradford, Andrei Shleifer, Lawrence H. Summers, and Robert Waldmann, 1990a, Noise trader risk in financial markets, Journal of Political Economy 98, 703-738.
(s) DeLong, J. Bradford, Andrei Shleifer, Lawrence H. Summers, and Robert Waldmann, 1990b, Positive feedback investment strategies and destabilizing rational speculation, Journal of Finance 45, 379-395.
(s) Scharfstein, David S., and Jeremy C. Stein, 1990, Herd behavior and investment, American Economic Review 80, 465-479.
(s)Benartzi, S. and R. H. Thaler, 1995, “Myopic loss aversion and the equity premium puzzle,” Quarterly Journal of Economics 110, 73-92.
(s) Froot, Kenneth A., David S. Scharfstein, and Jeremy C. Stein, 1992, Herd on the street: informational inefficiencies in a market with short-term speculation, Journal of Finance 47, 1461-1484.
(r) Hong, Harrison, and Jeremy C. Stein, 1999, "A Unified Theory of Underreaction, Momentum Trading and Overreaction in Asset Markets", Journal of Finance 54, 2143-2184.
(r) Barberis, N., A. Shleifer, and R. Vishny, 1998, “A model of investor sentiment,” Journal of Financial Economics 49, 307-343.
(r) Daniel, K., D. Hirshleirfer, and A. Subrahmanyam, 1998, “Investor Overconfidence, Risk, and Predictors of Security Returns,” Journal of Finance.
(s) Barberis, Nicholas and A. A. Shleifer, Style Investing, working paper, University of Chicago.
B) Empirical
(s) Odean, Terrance, 1998, Are investors reluctant to realize their losses?, Journal of Finance 53, 1775-1798.
(r) Odean, Terrance, 1999, "Do Investors Trade Too Much?", American Economic Review 89, 1279-1298.
(r) Odean, Terrance, Brad Barber and Ning Zhu, Systematic Noise, Berkley Working paper.
(r) Hong, Harrison, Joseph Chen, and Jeremy Stein, "Breadth of Ownership and Stock Returns" Journal of Financial Economics, November 2002.
(r) Wurgler, Jeffrey and Malcolm Baker, 2003, Investor sentiment and the cross-section of stock returns, 2003.
(s) Hong, Harrison and Jeremy Stein, "Differences of Opinion, Short-Sales Constraints and Market Crashes" forthcoming, Review of Financial Studies.
(s) Hong, Harrison, Jeffrey Kubik, and Jeremy Stein "Social Interaction and Stock Market Participation" forthcoming at Journal of Finance.
(s) Barber, Brad M., and Terrance Odean, 2000, Trading is hazardous to your wealth: The common stock investment performance of individual investors, Journal of Finance 55, 773-806.
(r) Griffin, John M., Jeffrey Harris, and Selim Topaloglu, 2003, The Dynamics of Institutional and Individual Trading, Journal of Finance 58, 2285-2320.
(r) Hirshleifer, David, 2001, Investor Psychology and Asset Pricing, Journal of Finance 56, 1533-1597.
(r) Barber, Brad, Terry Odean, and Ning Zhu, 2003, Systematic Noise, Working paper, UC Davis.
(r) Black, Fisher, 1986, Noise, the Journal of Finance 41, 529-543.
(r) Shleifer, Andrei, 1986, Do Demand Curves for Stocks Slope Down? The Journal of Finance 41, 579-590.
B.1. Seasonal Effects
(r) Kamstra, Mark, Lisa Kramer and Maurice Levi, 2003, Winter Blues: A SAD Stock Market Cycle, American Economic Review 93(1), 324-343.
(r) Kelly, Patrick J. and J. Felix Meschke, 2004, Winter Blues: A SAD Stock Market Cycle: Comment, Working Paper, Arizona State University.
A. International Asset Pricing
(r) Karolyi, G. Andrew, and Rene M. Stulz, 2003, Are financial assets priced locally or globally? In: George M. Constantinides, Milton Harris and René Stulz (eds.) Handbook of the Economics of Finance, Chapter 16. (also NBER Working Paper No. 8994.)
(s) Stulz, R., 1995, "International Portfolio Choice and Asset Pricing: An Integrative Survey," in Jarrow, R., V. Maksimovic, W. Ziemba, eds., Finance (Volume 9, Handbooks in Operations Research and Management Science), Elsevier Science, Amsterdam.
(s) Adler, M. and B. Dumas, 1983, “International portfolio selection and corporation finance: A synthesis,” Journal of Finance 38, 925-984.
(s) Stulz, R., 1981, "A Model of International Asset Pricing," Journal of Financial Economics 9, 383-406.
(s) Solnik, B., 1996, International Investments, 3rd Edition. New York: Addison- Wesley.
(s) Bekaert, G. and C. Harvey, 1995, "Time-varying World Market Integration," Journal of Finance 50, 403-443.
(s) Bekaert, G. and C. Harvey, 1997, "Emerging Equity Market Volatility" Journal of Financial Economics 43, 29-77.
(s) Bekaert, G., and R. Hodrick, 1992, "Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets," Journal of Finance 47, 467-509.
(s) Bekaert, G. and M. Urias, 1996, "Diversification, Integration and Emerging Market Closed End Funds" Journal of Finance 51, 835-869.
(s) Chan, K.C., G. A. Karolyi and R. Stulz, 1992, "Global Financial Markets and the Risk Premium on U.S. Equity," Journal of Financial Economics 32, 137-167.
(s) Jorion, P., 1991, “The pricing of exchange rate risk in the stock market,” Journal of Financial and Quantitative Analysis 26, 363-76.
(s) DeSantis, G. and B. Gerard, "International Asset Pricing and Portfolio Diversification with Time-varying Risk," Journal of Finance 52, 1881-1912.
(s) DeSantis, G. and B. Gerard, 1998, "How Big is the Premium for Currency Risk?" Journal of Financial Economics 49, 375-411.
(s) Dumas, A. and B. Solnik, 1995, "The World Price of Exchange Rate Risk," Journhal of Finance 50, 445-479.
(s) Errunza, V., K. Hogan and M. Hung, 1999, "Can the gains for International Diversification be Achieved Without Trading Abroad?" forthcoming Journal of Finance.
(s) Ferson, W. and C. Harvey, 1993, "The Risk and Predictability of International Equity Returns," Review of Financial Studies 6, 527-565.
(s) Harvey, C., 1991, "World Price of Covariance Risk," Journal of Finance 46, 111-57.
(s) Fama, E. F., and K. R. French, 1998, “Value versus growth: The international evidence,” Journal of Finance, 53, 1975-1999.
(s)
Griffin, J., 2001, "Are the Fama and French Factors Global or
Country-Specific?" The Review of Financial
Studies.
(s) Adler, M. and B. Dumas, 1984, “Exposure to currency risk: Definition and measurement,” Financial Management 13, 41-50.
(s) Allayannis, G., 1996a, “Exchange rate exposure revisited,” New York University working paper.
(s) Allayannis, G., 1996b, “Time variation of exchange rate exposure: An industry analysis,” New York University working paper.
(s) Bartov E., and G. Bodnar, 1994, “Firm valuation, earnings expectations and the exchange-rate effect, Journal of Finance 49, 1755-1785.
(s) Bodnar, G., and Gentry, W., 1993, Exchange rate exposure and industry characteristics: Evidence from Canada, Japan, and the U.S., Journal of International Money and Finance 12, 29-45.
(s) Chow, E., W. Lee, and M. Solt, 1997, “The Exchange-Rate Risk Exposure of Asset Returns,” Journal of Business 70, 107-123.
(s) He, J. and L. Ng, 1998, “Foreign Exchange Exposure, Risk, and the Japanese Stock Market” Journal of Finance, 53, 733-753.
(s) Jorion, P., 1990, “The exchange rate exposure of U.S. multinationals, Journal of Business 63, 331-345.
(s) Simpkins, B. J. and P. Laux, 1997, “Derivatives use and the exchange rate risk of large US corporations,” Oklahoma State University Working Paper.
(s) Williamson, R., 2000, Exchange rate exposure and competition: Evidence from the automotive industry, Journal of Financial Economics, forthcoming.
(s) "International competition and exchange rate shocks: A cross-country industry analysis" with René M. Stulz, 2001, The Review of Financial Studies 14, p. 215-241.
(s) "An International Comparison of Exchange Rate Exposure," 2001, with Craig Doidge and Rohan Williamson.
C. Other International Finance Issues-- Linkages, Correlations, ect.
(s) Jorion, P. and E. Schwartz, 1986, "Integration vs Segmentation in the Canadian Stock Market," Journal of Finance 41, 603-614.
(s) Karolyi, G. A. and R. Stulz, 1996, "Why do Markets Move Together? An Investigation of the U.S.-Japanese Stock Return Comovements" Journal of Finance 51, 951-986.
(s) Heston, S. and G. Rouwenhorst, 1994, "Does Industrial Structure Explain the Benefits of International Diversification?" Journal of Financial Economics 36, 3-27.
(s) Roll, R., 1992, "Industrial Structure and the Comparative Behavior
of International Stock Market Indexes," Journal of Finance 47, 3-42.
(s) "Another look at the Role of the Industrial Structure of Markets for International Diversification
Strategies" with G. Andrew Karolyi, 1998, Journal of Financial Economics 50, 351-373.
(s) King, M., E. Sentana and S. Wadhwani, 1994, “Volatility and links between national stock markets,” Econometrica 78, 901-934.
(s) Longin, F. and B. Solnik, 1995, “Is the correlation in international equity returns constant: 1960-1990?” Journal of International Money and Finance 14, 3-26.
(s) Hamao Y., R. Masulis and V. Ng, 1990, “Correlations in Price Changes and Volatility across International Stock Markets,” Review of Financial Studies 3, 281-307.
D. Capital Flows and Contagion
(r) Stulz, René M., 1997, International portfolio flows and security markets, Unpublished working paper, Dice Center for Financial Economics, The Ohio State University, Columbus, OH.
(s) Bekaert, Geert, and Campbell R. Harvey, 1998b, Foreign speculators and emerging equity markets, Unpublished working paper, Duke University.
(s) Bohn, Henning, and Linda Tesar, 1996, U.S. equity investment in foreign markets: Portfolio rebalancing or return chasing?, American Economic Review 86, 77-81.
(s) Brennan, M. J., and Cao, H. H., 1997, International portfolio investment flows, Journal of Finance 52, 1851-1880.
(s) Bailey, Warren, Kalok Chan, and Y. Peter Chung, 1998, Depository receipts, country funds, and the Peso crash: The intraday evidence, Unpublished paper, Cornell University.
(s) Bekaert, Geert, and Campbell R. Harvey, 1998a, Capital flows and the behavior of emerging market equity returns, Unpublished working paper, Duke University.
(s) Choe, Hyuk, Bong-Chan Kho, and Rene M. Stulz, 1999, Do foreign investors destabilize stock markets? The Korean experience in 1997, Journal of Financial Economics 54, 227-264.
(s) Choe, Hyuk, Bong-Chan Kho, and Rene M. Stulz, 2001, Do domestic investors have more valuable information about individual stocks than foreign investors?, Working paper, Ohio State University.
(s)Froot, Kenneth A., and Tarun Ramadorai, 2001, The information content of international portfolio flows, Working paper, Harvard University.
(s) Froot, Kenneth A., Paul G. J. O'Connell, and Mark S. Seasholes, 2001, The portfolio flows of international investors, Journal of Financial Economics 59, 151-193.
(s) Karolyi, G. Andrew, 1999, Did the Asian financial crisis scare foreign investors out of Japan?, Working paper, Ohio State University.
(s)Seasholes, Mark S., 2000, Smart foreign traders in emerging markets, Working paper, Harvard University.
(s) "Investability and Return Volatility in Emerging Equity Markets", with Kee-Hong Bae and Angela Ng, 2003, Journal of Financial Economics, forthcoming. (pdf file) (appendix)
(s) Froot, Kenneth A., and Tarun Ramadorai, 2002, Currency Returns, Institutional Investor Flows, and Exchange Rate Fundamentals, NBER Working paper 9101.
(r) Morck, Randall,
Bernard Yeung and Wayne Yu. 2000. The
Information Content of Stock Markets: Why Do Emerging Markets Have Synchronous
Stock Price Movements? Journal of Financial Economics 58(1) Oct.
215-260.
(r) Levine, Ross, 1997, Financial
development and economic growth: Views and agenda, Journal of Economic
Literature 35, 688-726.
(s) Doidge, Craig, G. Andrew Karolyi, and Rene Stulz, 2004, "Why Are Foreign Firms that List in the U.S. Worth More?" Journal of Financial Economics, forthcoming.
E. Other
(r) Griffin, John M., Federico Nardari, and René M. Stulz, 2004, "Daily Cross-border Equity Flows: Pushed or Pulled?" forthcoming, Review of Economics and Statistics.
(s) Lakonishok, Josef, Andrei Shleifer, and Robert W. Vishny, 1992, The impact of institutional trading on stock prices, Journal of Financial Economics 32, 23-43.
(s) Barclay, Michael J., and Jerold B. Warner, 1993, Stealth trading and volatility: Which trades move prices?, Journal of Financial Economics 34, 281-305.
(s) Sias, Richard W., and Laura T. Starks, 1997, Return autocorrelation and institutional investors, Journal of Financial Economics 46, 103 – 131.
(s) Sias, Richard W., Laura T. Starks, and Sheridan Titman, 2000, The price impact of institutional trading, Working paper, University of Texas.
(s) Cai, Fang, Gautam Kaul, and Lu Zheng, 2000, Institutional trading and stock returns, Working paper, University of Michigan.
(s) Chan, Louis K.C., and Josef Lakonishok, 1995, The behavior of stock prices around institutional trades, Journal of Finance 50, 1147-1174.
(s) Edelen, Roger M., 1999, Investor flows and the assessed performance of open-end mutual funds, Journal of Financial Economics 53, 439-466.
(s) Edelen, Roger M., and Jerold B. Warner, 2001, Aggregate price effects of institutional trading: A study of mutual fund flow and market returns, Journal of Financial Economics 59, 195-220.
(s)
Griffin, John, Jeffrey Harris and Selim Topaloglu, 2002,
The Dynamics
of Institutional and Individual Trading, forthcoming, Journal of Finance.
(s) Goetzmann, William N., and
Massimo
Massa , 2003, Daily Momentum And Contrarian Behavior Of Index Fund Investors,
Working paper, Yale International Center for Finance.
(r) Goetzmann, William N., and Massimo Massa , 2003, Index Funds and Stock Market Growth, Working paper, Yale International Center for Finance.
(s) Goetzmann, William N., and Massimo Massa , 2003, "Disposition Matters: Volume, Volatility and Price Impact of a Behavioral Bias," Working paper, Yale International Center for Finance.
(s) Goetzmann, William N. , Massimo Massa, and K. Geert Rouwenhorst , 2003, Behavioral Factors in Mutual Fund Flows, Working paper, Yale International Center for Finance.
B. Performance Evaluation and Mutual funds
(s) Admati, A. and S. Ross, 1985, "Measuring Investment Performance in a Rational Expectations Equilibrium Model," Journal of Business 58, 1-26.
(s) Admati, A., Bhattacharya, S., Pfleiderer, P. and S. Ross, 1986, "On Timing and Selectivity," Journal of Finance 41, 715-730.
(s) Brown, S., Goetzmann, W., Ibbotson, R. and S. Ross, 1992, "Survivorship Bias in Performance Studies," Review of Financial Studies 5, 553-580.
(s) Christopherson, J., W. Ferson and D. Glassman, 1998, "Conditioning Manager Alphas on Economic Information: Another Look at the Persistence of Performance" Review of Financial Studies 11, 111-142.
(s) Connor, G. and R. Korajczyk, 1986, "Performance Measurement with the Arbitrage Pricing Theory: A New Framework for Analysis," Journal of Financial Economics 15, 373-394.
(s) Cumby, R. and D. Modest, 1987, "Testing for Market Timing Ability: A Framework for Forecast Evaluation," Journal of Financial Economics 19, 169-190.
(s) Dybvig, P. and S. Ross, 1985, "Differential Information and Performance Measurement Using a Security Market Line," Journal of Finance 40, 383-399.
(s) Elton, E., M. Gruber and C. Blake, 1996, "Survivorship Bias and Mutual Fund Performance" Review of Financial Studies 9, 1097-1120.
(s) Ferson, W. and R. Schadt, 1995, "Measuring Fund Strategy and Performance in Changing Economic Conditions," Journal of Finance 51, 425-461.
(s) Grinblatt, M. and S. Titman, 1989, "Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings," Journal of Business 62, 393-416.
(s) Grinblatt, M. and S. Titman, 1989, "Portfolio Performance Evaluation: Old Issues and New Insights," Review of Financial Studies 2, 393-422.
(s) Grinblatt, M. and S. Titman, 1993, "Performance Measurement without Benchmarks: An Examination of Mutual Fund Returns," Journal of Business 66, 47-68.
(s) Hendricks, D., J. Patel and R. Zeckhauser, 1993, "Hot Hands in Mutual Funds: Short-run Persistence of Relative Performance, 1974-1988" Journal of Finance 48, 93-130.
(s) Henriksson, R. and R. Merton, 1981, "On Market Timing and Investment Performance II: Statistical Procedures for Evaluating Forecasting Skills," Journal of Business 54, 513-533.
(s) Jobson, J. and R. Korkie, 1981, "Performance Hypothesis Testing with the Sharpe and Treynor Measures," Journal of Finance 36, 889-908.
(s) Mayers, D. and E. Rice, 1979, "Measuring Portfolio Performance and the Empirical Content of Asset Pricing Models," Journal of Financial Economics, 7, 3-29.
(s) Merton, R., 1981, "On Market Timing and Investment Performance I: An Equilibrium Theory of Value for Market Forecasts," Journal of Business 54, 363-406.
(s) Roll, R., 1978, "Ambiguity When Performance is Measured by the Securities Market Line," Journal of Finance 33, 1051-1069.
(s) Roll, R., 1979, "Reply to Mayers and Rice," Journal of Financial Economics 7, 391-400.
(s) Sharpe, W., 1966, "Mutual Fund Performance," Journal of Business 39, 119-138.
(s) Treynor, J., 1965, "How to Rate Management of Investment Funds," Harvard Business Review 43, 63-75.
(s) Treynor, J. and F. Mazuy, 1966, "Can Mutual Funds Outguess the Market?" Harvard Business Review 44, 131-136.
(s) Chen, Hsiu-Lang, Narasimhan Jegadeesh, and Russ Wermers, 2000, The value of active mutual fund management: An examination of the stockholdings and trades of fund managers, Journal of Finance and Quantitative Analysis 35, 343-368.
(s) Wermers, Russ, 1999, Mutual fund herding and the impact on stock prices, Journal of Finance 54, 581-622.
(r) Grinblatt, Mark, Sheridan Titman, and Russ Wermers, 1995, Momentum investment strategies, portfolio performance, and herding: A study of mutual fund behavior, American Economic Review 85, 1088-1105.
(s) Nofsinger, John R., and Richard W. Sias, 1999, Herding and feedback trading by institutional and individual investors, Journal of Finance 54, 2263-2295.
(r) Daniel, Kent, Mark Grinblatt, Sheridan Titman, and Russ Wermers, 1997, Measuring mutual fund performance with characteristic-based benchmarks, Journal of Finance 52, 1035-1058.
(s) Wermers, Russ, 2000, Mutual fund performance: An empirical decomposition into stock-picking talent, style, transactions costs, and expenses, Journal of Finance 55, 1655-1695.
(s) Wermers, Russ, 2003, Is Money Really "Smart"? New Evidence on the Relation Between Mutual Fund Flows, Manager Behavior, and Performance Persistence
(r) Pastor, Lubos, and Robert F. Stambaugh, Mutual fund performance and seemingly unrelated assets, 2002, Journal of Financial Economics 63, 315--349.
(s) Pastor, Lubos, and Robert F. Stambaugh, Investing in equity mutual funds, 2002, Journal of Financial Economics 63, 351-380.
(s) Cohen, Randolph, Joshua Coval, and Luboš Pástor. "Judging Fund Managers by the Company They Keep." National Bureau of Economic Research Working Paper Series, No. W9359, 2002.
(r) Geczy, Christopher C., Robert F. Stambaugh, and David Levin, 2003, Investing in Socially Responsible Mutual Funds, Working paper, Wharton School.
and individual investors
(r) Grinblatt, Mark, and Matti Keloharju, 2000, The investment behavior and performance of various investor types: A study of Finland’s unique data set, Journal of Financial Economics 55, 43-67.
(r) Coval, Joshua D., David Hirshleifer, and Tyler Shumway, 2002, "Can Individual Investors Beat the Market?"
C) Hedge Funds
(s)
William N. Goetzmann ,
Roger G.
Ibbotson and
Stephen
J. Brown, 2002, Offshore
Hedge Funds: Survival & Performance 1989-1995
(s) William N. Goetzmann ,
Stephen
J. Brown and
James M.
Park , 2002, Hedge
Funds and the Asian Currency Crisis of 1997
(s) Stephen J. Brown and William N. Goetzmann, 2002, Hedge Funds With Style
XIII. Market Microstructure.
(r) Campbell, J., A. Lo and C. MacKinlay, "Chapter 3: Market Microstructure" in The Econometrics of Financial Markets.
A. Classics
(s) Demsetz, H. 1968 “The Cost of Transacting”, Quarterly Journal of
Economics, 82, 33-53.
(s) Ho, T., and H. Stoll, 1980 “On Dealer Markets Under Competition” The
Journal of Finance, Vol. 35, 259-267.
(s) Glosten, L. and P. Milgrom, 1985, “Bid, Ask, and Transaction Prices in
a Specialist Market with Heterogeneously Informed Traders”, Journal of
Financial Economics, 14, 71-100.
B. Institutional Aspects of Market Structure
(s) Amihud, Y. and H. Mendelson, 1987, "Trading Mechanisms and Stock Returns: An Empirical Investigation," Journal of Finance 42, 533-553.
(s) Christie, W. and P. Schultz, 1994, "Why do NASDAQ Market-makers Avoid Odd-Eighth Quotes?" Journal of Finance 49, 1813-1840.
(s) Cohen, K., Maier, S., Schwartz, R. and D. Whitcomb, 1986, The Microstructure of Securities Markets. New Jersey: Prentice-Hall.
(s) Foster, D. and S. Viswanathan, 1993, "Variations in Trading Volume, Return Volatility and Trading Costs," Journal of Finance 48, 187-211.
(s) Hasbrouck, J., 1988, "Trades, Quotes, Inventories and Information," Journal of Financial Economics 22, 229-252.
(s) Hasbrouck, J., 1991, "Measuring the Information Content of Stock Trades," Journal of Finance 46, 176-208.
(s) Hasbrouck, J. and T. Ho, 1987, "Order Arrival, Quote Behavior, and the Return-Generating Process," Journal of Finance 42, 1035-1048.
(s) Lee, C. and M. Ready, 1991, "Inferring Trade Direction from Intraday Data," Journal of Finance 46, 733-746.
(s) Madhavan, A. and S. Smidt, 1991, "A Bayesian Model of Intraday Specialist Pricing," Journal of Financial Economics 30, 99-134.
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(s) Journal of Financial Economics Symposium on Dealer Markets, July 1997.
(s) Wood, R., McInish, T. and K. Ord, 1985, "An Investigation of Transactions Data for NYSE Stocks," Journal of Finance 40, 723-738.
C. Non-Synchronous Trading and Measurement Biases
(s) Ball, C., 1988, "Estimation Bias Induced by Discrete Security Prices," Journal of Finance 43, 841-865.
(s) Blume, M. and R. Stambaugh, 1983, "Biases in Computed Returns: An Application to the Size Effect," Journal of Financial Economics 12, 387-404.
(s) Dimson, E., 1979, "Risk Measurement when Shares are Subject to Infrequent Trading," Journal of Financial Economics 7, 197-226.
(s) Fisher, L., 1966, "Some New Stock Market Indexes," Journal of Business 39, 191-225.
(s) Fowler, D. and C. Rorke, 1983, "Risk Measurement when Shares are Subject to Infrequent Trading: Comment," Journal of Financial Economics 12, 279-283.
(s) Lo, A. and C. MacKinlay, 1990, "An Econometric Analysis of Non-Synchronous Trading," Journal of Econometrics 45, 181-212.
(s) Roll, R., 1983, "On Computing Mean Returns and the Small Firm Premium," Journal of Financial Economics 12, 371-387.
(s) Scholes, M. and J. Williams, 1977, "Estimating Beta From Non-Synchronous Data," Journal of Financial Economics 5, 309-327.
D. Bid-Ask Spreads and Price Discreteness
(s) George, T., G. Kaul and M. Nimalendran, 1991, "Estimation of the Bid-Ask Spread and its Components: A New Approach," Review of Financial Studies 4, 623-656.
(s) Glosten, L. and L. Harris, 1988, "Estimating the Components of the Bid/Ask Spread," Journal of Financial Economics 21, 123-142.
(s) Harris, L., 1991, "Stock Price Clustering and Discreteness," Review of Financial Studies 5, 389-415.
(s) Hausman, J., Lo, A. and C. MacKinlay, 1991, "An Ordered Probit Analysis of Transaction Stock Prices," Journal of Financial Economics 31, 319-379.
(s) Roll, R., 1984, "A Simple Implicit Measure of the Effective Bid-Ask
Spread in an Efficient Market," Journal of Finance 39, 1127-1139.
(s) Huang, R. and H. Stoll, 1997 “The Components of the Bid-Ask Spread: A
General Approach”, Review of Financial Studies, 4, 995-1034.
(s) Bollen, N., T. Smith, and R. Whaley, 2004, “Modeling the Bid-Ask Spread: Measuring the Inventory-Holding Premium”, Journal of Financial Economics 72 97-141.
E. Price Discovery
(s) Hasbrouck, J. “One Security, Many Markets: Determining the
Contributions to Price Discovery”, Journal of Finance, 1995.
(s) Hasbrouck, J., 2003 “Intraday Price Formation in U.S. Equity Index Markets”,
Journal of Finance 58, 2375-2400.
(s) Chakravarty, S., H. Gulen, and S. Mayhew, 2003, “Informed Trading in Stock
and Options Markets” Journal of Finance, forthcoming (June 2004).
F. Market Design
(s) Barclay, M., W. Christie, J. Harris, E. Kandel and P. Schultz, 1999,
“Effects of Market Reform on the Trading Costs and Depths of Nasdaq Stocks”,
Journal of Finance,
(s) Venkataraman, K., 2001, “Automated Versus Floor Trading: An Analysis of
Execution Costs on the Paris and New York Exchanges” Journal of Finance,
July 2001.
(s) Huang, R., “The Quality of ECN and Nasdaq Market Maker Quotes”, Journal
of Finance, June 2002.
G. Microstructure with parts of Finance
(r) Brockman, P., and D. Chung, 2003, “Investor Protection and Firm
Liquidity”, Journal of Finance 58, 921-938.
(s) Lyons, R. and M. Evans, 2002 “Order Flow and Exchange Rate Dynamics” Journal
of Political Economy 110, 170-180.
(s) Easley, David, and Maureen O'hara, 2004, Information and Cost of Capital, Journal of Finance, forthcoming.
(s) O'hara, Maureen, 2003, Presidential Address: Liquidity and Price Discovery, Journal of Finance 58, 1335-1354.
(r) Easley, David, Soeren Hvidkjaer, and Maureen O'hara, 2002, "Is Information Risk a Determinant of Asset Returns?" Journal of Finance 57, 2185-2221.
(s)
Gallant, A. Ronald, Peter E. Rossi,
and George Tauchen, 1992, Stock Prices and Volume, RFS 5, 199-242.
(s)
Lo, Andrew W., and Jiang Wang, 2000,
Trading Volume: Definitions, Data Analysis, and Implications of Portfolio
Theory, RFS 13, 257-300.
(s)
Llorente, Guillermo, Roni Michaely,
Gideon Saar, and Jiang Wang, 2002, Dynamic Volume-Return Relation of Individual
Stocks, RFS 15, 1005-1047.
(s)
Lo, Andrew W., Harry Mamaysky, and
Jiang Wang, 2001, Asset prices and trading volume under fixed transaction costs,
Working paper, MIT.
(s)
Brailsford, Timothy J., 1994, The
empirical relationship between trading volume, returns and volatility, Working
paper, University of Melbourne.
(s) Campbell, Lettau, Malkiel, and Xu, 2001, "Have individual stocks become more volatile?" JF 56, 233-264.
(s) Schwert, G. William, 2002, "Stock Volatility in the New Millennium: How Wacky is Nasdaq?" Journal of Monetary Economics 49, 3-26.
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Schwert, G. William, 1998, "Stock
Market Volatility: Ten Years After the Crash," Brookings-Wharton
Papers on Financial Services I, 65-114.
(r) Campbell, J., A. Lo and C. MacKinlay, "Chapter 4: Event Study Analysis" in The Econometrics of Financial Markets.
A. Traditional Event Study Methodology
(s) Ball, C. and W. Torous, 1988, "Investigating Security Price Performance in the Presence of Event Date Uncertainty," Journal of Financial Economics 22, 123-154.
(s) Binder, J., 1985, "On the Use of the Multivariate Regression Model in Event Studies," Journal of Accounting Research 23, 370-383.
(s) Boehmer, E., Musumeci, J. and A. Poulsen, 1991, "Event-Study Methodology Under Conditions of Event-Induced Variance," Journal of Financial Economics 30, 253-272.
(s) Brown, S. and J. Warner, 1985, "Using Daily Stock Returns: The Case of Event Studies," Journal of Financial Economics 14, 3-31.
(s) Fama, E., 1976, Foundations of Finance. New York: Basic Books. Chapters 3 and 4.
(s) Fama, E., Fisher, L., Jensen, M. and R. Roll, 1969, "The Adjustment of Stock Prices to New Information," International Economic Review 10, 1-21.
(s) Malatesta, P., 1986, "Measuring Abnormal Performance: The Event Parameter Approach Using Joint Generalized Least Squares," Journal of Financial and Quantitative Analysis 21, 27-38.
(s) Prabhala, N., 1997, "Conditional Methods in Event Studies and an Equilibrium Justification for Standard Even-Study Procedures" Review of Financial Studies 10, 1-38.
(s) Sefcik, S. and R. Thompson, 1986, "An Approach to Statistical Inference in Cross-sectional Models with Security Abnormal Returns as Dependent Variable," Journal of Accounting Research 24, 316-334.
(s) Thompson, R., 1985, "Conditioning the Return-Generating Process on Firm Specific Events: A Discussion of Event Study Methods," Journal of Financial and Quantitative Analysis 20, 151-168.
B. Long-run Performance Measurement
(r) Barber, B. and J. Lyon, 1997, "Detecting Long-Horizon Abnormal Stock Returns: The Empirical Power and Specification of Test Statistics" Journal of Financial Economics 43, 341-368.
(s) Brav, A., 1997, "Inference in Long-Horizon Event Studies: A Rev-evaluation of the Evidence" Duke University working paper.
(s) Fama, E., 1998, "Market Efficiency, Long-run Returns and Behavioral Finance" Journal of Financial Economics 49, 283-306.
(r) Lyon, J., B. Barber and C. Tsai, 1997, "Improved Methods for Tests of Long-Run Abnormal Returns" forthcoming Journal of Finance.
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Stock Returns Following Seasoned Equity Offerings" Journal of Financial
Economics 38, 243-267.
(r) Campbell, J., A. Lo and C. MacKinlay, "Chapter 10: Fixed-Income Securities" and "Chapter 11: Term-Structure Models" in The Econometrics of Financial Markets.
A. The Term Structure of Interest Rates
(r) Ait-Sahalia, Y., 1996, "Testing Continuous Time Models of the Spot Interest Rate" Review of Financial Studies 9, 385-426.
(s) Brennan, M. and E. Schwartz, 1977, "Savings Bonds, Retractable Bonds and Callable Bonds," Journal of Financial Economics 5, 67-88.
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(s) Stambaugh, R., 1988, "The Information in Forward Rates: Implications for Models of the Term Structure," Journal of Financial Economics 21, 41-70.
(r) Stanton, R., 1997, "A Nonparametric Model of Term Structure Dynamics and the Market Price of Interest Rate Risk" Journal of Finance 52, 1973-2001.
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B. Pricing Debt with Default Risk
(s) Altman, E., 1989, "Measuring Corporate Bond Mortality and Performance," Journal of Finance 44, 909-922.
(s) Asquith, P., Mullins, D. and E. Wolff, 1989, "Original Issue High Yield Bonds: Aging Analysis of Defaults, Exchanges and Calls," Journal of Finance 44, 923-952.
(s) Blume, M., Keim, D. and S. Patel, 1991, "Returns and Volatility of Low-Grade Bonds, 1977-1989," Journal of Finance 46, 49-74.
(r) Jarrow, R., D. Lando and S. Turnbull, 1997, "A Markov Model for the Term Structure of Credit Risk Spreads" Review of Financial Studies 10, 481-523.
(s) Kaplan, R. and G. Urwitz, 1979, "Statistical Models of Bond Ratings: A Methodological Inquiry," Journal of Business 52, 231-262.
(s) Lo, A., 1986, "Logit Versus Discriminant Analysis: A Specification Test with Applications to Corporate Bankruptcies," Journal of Econometrics 31, 151-178.
(s) Longstaff, F., and E. Schwartz, 1995, "A Simple Approach to Valuing
Risky Fixed and Floating Rate Debt" Journal of Finance 50, 789-820.
(r) Campbell, J., A. Lo and C. MacKinlay, "Chapter 9: Derivative Pricing Models" in The Econometrics of Financial Markets.
A. Option Pricing Models
(r) Bakshi, G., C. Cao and Z. Chen, 1997, "Empirical Performance of Alternative Option Pricing Models" Journal of Finance 52, 2003-2049.
(s) Bates, D., 1991, "The Crash of `87: Was It Expected? The Evidence from Options Markets," Journal of Finance 46, 1009-1044.
(s) Cox, J. and S. Ross, 1976, "The Valuation of Options for Alternative Stochastics Processes," Journal of Financial Economics 3, 145-166.
(s) Cox, J., Ross, S. and M. Rubinstein, 1979, "Option Pricing: A Simplified Approach," Journal of Financial Economics 7, 229-263.
(s) Cox, J. and M. Rubinstein, 1985, Options Markets, Prentice Hall. Chapter 6.
(s) Duan, J.C., 1995, "GARCH Option Pricing Model," Mathematical Finance 5, 13-32.
(s) Grundy, B., 1991, "Option Prices and the Underlying Asset's Return Distribution," Journal of Finance 46, 1045-1070.
(s) Heston, S., 1993, "A Closed-form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," Review of Financial Studies 6, 327-343.
(s) Hull, J. and A. White, 1987, "The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance 42, 281-300.
(s) Karolyi, G.A., 1993, "A Bayesian Model of Stock Return Volatility for Option Valuation," Journal of Financial and Quantitative Analysis, 579-594.
(s) Latane, H. and R. Rendleman, 1976, "Standard Deviations of Stock Price Ratios Implied in Options Prices," Journal of Finance 31, 369-381.
(s) Lo, A., 1986, "Statistical Tests of Contingent Claims Asset-Pricing Models: A New Methodology," Journal of Financial Economics 17, 143-173.
(s) Lo, A., 1987, "Semiparametric Upper Bounds for Option Prices and Expected Payoffs," Journal of Financial Economics 19, 373-388.
(s) Lo, A. and J. Wang, 1995, "Implementing Option Pricing Models when Asset Returns are Predictable," Journal of Finance 50, 87-115.
(s) Merton, R., 1976, "The Impact on Option Pricing of Specification Error in the Underlying Stock Price Distribution," Journal of Finance 31, 333-350.
(s) Merton, R., 1976, "Option Pricing When Underlying Stock Returns are Discontinuous," Journal of Financial Economics 3, 125-144.
(s) Merton, R., 1990, Continuous-Time Finance. Cambridge: Basil Blackwell. Chapter 3.
(s) Rubinstein, M., 1985, "Nonparametric Tests of Alternative Option Pricing Models Using All Reported Trades and Quotes on the 30 Most Active CBOE Option Classes from August 23, 1976 Through August 31, 1978," Journal of Finance 40, 455-480.
(s) Whaley, R., 1982, "Valuation of American Call Options on Dividend-Paying Stocks: Empirical Tests," Journal of Financial Economics 10, 29-58.
(s) Wiggins, J., 1987, "Option Values Under Stochastic Volatility: Theory and Empirical Estimates," Journal of Financial Economics 19, 351-372.
(s) Poteshman, Allan, and Jun Pan, 2003, The Information in Option Volume for Stock Prices, Working paper, UIUC and MIT.
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B. Futures and Forward Prices
(s) Chan, K., K.C. Chan and G.A. Karolyi, 1991, "Intraday Volatility in the Stock Index and Stock Index Futures Markets," Review of Financial Studies 4, 657-684.
(s) Hansen, L. and R. Hodrick, 1980, "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy 88, 829-853.
(s) MacKinlay, A. and K. Ramaswamy, 1988, "Index Futures Arbitrage and the Behavior of Stock Index Futures Prices," Review of Financial Studies 1, 137-158.
(s) Siegel, D. and D. Siegel, 1990, Futures Markets. Chicago: Probus Publishing.
(s) Stoll, H. and R. Whaley, 1990, "The Dynamics of Stock Index and Stock Index Futures Returns," Journal of Financial and Quantitative Analysis 25,441-468.
(r) Campbell, J., A. Lo and C. MacKinlay, "Chapter 12: Nonlinearities in Financial Data" in The Econometrics of Financial Markets. Section 12.4.
A. Chaos and Nonlinear Dynamics in Stock Returns
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(s) Hutchinson, J., A. Lo and T. Poggio, 1994 "A Nonparametric Approach to Pricing and Hedging Derivative Securities via Learning Networks," Journal of Finance 49, 851-889.
(s) Kahneman, D. and A. Tversky, 1982, "The Psychology of Preferences," Scientific American 246, 160-173.
(s) Tversky, A. and D. Kahneman, 1987, "Rational Choice and the Framing of Decisions," in Rational Choice: The Contrast Between Economics and Psychology, edited by R. Hogarth and M. Reder. Chicago: University of Chicago Press.
(s) White, H., 1989, "Some Asymptotic Results for Learning in Single Hidden-Layer Feedforward Network Models," Journal of the American Statistical Association 84, 1003-1013.
B. Technical Trading Rules
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(s) Kho, B., 1996, "Time-varying Risk Premia, Volatility and Technical Trading Rule Profits: Evidence from Foreign Currency Futures Markets" Journal of Financial Economics 41, 249-289.
(s) Murphy, J., 1986, Technical Analysis of the Futures Market. New York: Prentice-Hall.
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