Weak and Semi-Strong Form Stock Return Predictability Revisited

This paper makes indirect inference about the time-variation in expected stock returns by comparing unconditional sample variances to estimates of expected conditional variances. The evidence reveals more predictability as more information is used, and no evidence that predictability has diminished in recent years. Semi-strong form evidence suggests that time-variation in expected returns remains economically important.

Weak and Semi-Strong Form Stock Return Predictability, Revisited

This paper makes indirect inference about the time-variation in expected stock returns by comparing unconditional sample variances to estimates of expected conditional variances. The evidence reveals more predictability as more information is used, and no evidence that predictability has diminished in recent years. Semi-strong form evidence suggests that time-variation in expected returns remains economically important.

Evaluating the Interest-Rate Risk of Adjustable-Rate Mortgage Loans

This paper evaluates the interest-rate risk inherent in an adjustable-rate mortgage (ARM) with sporadic rate adjustments and possibly binding periodic and life-of-loan rate change constraints. Simulation analysis forecasts ARM cash flows, determines the probability that constraints will hold, and partitions the loan into fixed and variable components. Simulation parameters are then altered to measure the impact of changes in contract terms and market conditions on the interest-rate risk of a typical ARM loan. Interest-rate sensitivity is found to be significantly less than that of fixed-rate loans and remarkably insensitive to changes in loan margins or initial loan rates after the first few years of an ARM's life. Therefore, it is not surprising that lenders have used these features to lure borrowers to ARMs. Periodic rate change limits and volatility in the underlying index are the only factors that influence the interest-rate risk of an existing ARM in a substantive way.

Predicting hedge fund performance when fund returns are skewed

We show that fund-specific return skewness is associated with managerial skill and future hedge fund performance. Specifically, skewness in fund returns reflects managerial skill in avoiding large drawdowns. Using a new measure of investment skill that accounts for this managerial ability, we demonstrate that traditional performance measures under-estimate (over-estimate) managerial performance when returns exhibit positive (negative) fund-specific skewness. Our new measure is particularly valuable during periods of economic crisis, when the annual risk-adjusted out-performance is 5.5%

Comparison of relativity theories with observer-independent scales of both velocity and length/mass

We consider the two most studied proposals of relativity theories with observer-independent scales of both velocity and length/mass: the one discussed by Amelino-Camelia as illustrative example for the original proposal (gr-qc/0012051) of theories with two relativistic invariants, and an alternative more recently proposed by Magueijo and Smolin (hep-th/0112090). We show that these two relativistic theories are much more closely connected than it would appear on the basis of a naive analysis of their original formulations. In particular, in spite of adopting a rather different formal description of the deformed boost generators, they end up assigning the same dependence of momentum on rapidity, which can be described as the core feature of these relativistic theories. We show that this observation can be used to clarify the concepts of particle mass, particle velocity, and energy-momentum-conservation rules in these theories with two relativistic invariants.Comment: 21 pages, LaTex. v2: Andrea Procaccini (contributing some results from hia Laurea thesis) is added to the list of authors and the paper provides further elements of comparison between DSR1 and DSR2, including the observation that both lead to the same formula for the dependence of momentum on rapidit

Offering Rates on Fixed‐ and Adjustable‐Rate Mortgage Loans

This paper analyzes the macroeconomic determinants of the spread between simultaneous fixed‐ and adjustable‐rate mortgage loan offering rates. Previously developed theoretical relationships are used to construct an econometric model that incorporates both general financial market and region‐specific variables. Results indicate that changes in offering rate spreads are positively related to changes in the level and volatility of interest rates and negatively related to changes in variables that proxy for potential default risk