Estimation Risk, Market Efficiency, and the Predictability of Returns

In asset pricing, estimation risk refers to investor uncertainty about the parameters of the return or cashflow process. We show that with estimation risk the observable properties of prices and returns can differ significantly from the properties perceived by rational investors. In particular, parameter uncertainty will tend to induce return predictability in ways that resemble irrational mispricing, and prices can violate familiar volatility bounds when investors are rational. Cross-sectionally, expected returns deviate from the CAPM even if investors attempt to hold mean-variance efficient portfolios, and these deviations can be predictable based on past dividends and prices. In short, estimation risk can be important for characterizing and testing market efficiency.

Ethical Challenges of Preexposure Prophylaxis for HIV

On July 16, 2012, emtricitabine/tenofovir (Truvada) became the first drug approved by the US Food and Drug Administration for preexposure prophylaxis (PrEP) of human immunodeficiency virus (HIV) for adults at high risk. While PrEP appears highly effective with consistent adherence, effective implementation poses ethical challenges for the medical and public health community. For PrEP users, it is necessary to maintain adherence, safe sex practices, and routine HIV testing and medical monitoring, to maximize benefits and reduce risks. On a population level, comparative cost-effectiveness should guide priority-setting, while safety measures must address drug resistance concerns without burdening patients\u27 access. Equitable distribution will require addressing the needs of underserved populations, women (for whom efficacy data are mixed) and people living in developing countries with high HIV incidence; meanwhile, it is necessary to consider the fair use of drugs for treatment vs. prevention and the appropriate design of new HIV prevention studies

A Skeptical Appraisal of Asset-Pricing Tests

It has become standard practice in the cross-sectional asset-pricing literature to evaluate models based on how well they explain average returns on size- and B/M-sorted portfolios, something many models seem to do remarkably well. In this paper, we review and critique the empirical methods used in the literature. We argue that asset-pricing tests are often highly misleading, in the sense that apparently strong explanatory power (high cross-sectional R2s and small pricing errors) in fact provides quite weak support for a model. We offer a number of suggestions for improving empirical tests and evidence that several proposed models don%u2019t work as well as originally advertised.

IRAS and ground-based observations of star formation regions in the Magellanic clouds

The Infrared Astronomy Satellite (IRAS) detected several hundred individual regions of star formation in the Large and Small Magellanic Clouds. Nearly two dozen of the brightest such sources were searched for from the ground at 10 microns; most of these were located and measured at wavelengths from 0.6 to 20 microns. Three principle results emerge from this study: First, the IRAS data show that star formation is considerably less active in the SMC than in the LMC, relative either to mass, luminosity, or H I content. The reduced activity in the SMC is consistent with the smaller amount of molecular material inferred from CO observations. Second, the sizes of the objects range from less than a few arcsecs (objects which look like extremely compact HII regions, with little or no extended radio, optical, or infrared emission) to some tens of arcsecs across (giant HII regions, of which the largest and brightest is 30 Doradus). Third, there are no obvious differences in the characteristics of the central portions of the LMC and SMC sources; all look like Galactic H II regions of similar luminosity