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Journal Article
Rule of law and economic growth
Working Paper
Market timing with aggregate and idiosyncratic stock volatilities
Guo and Savickas [2005] show that aggregate stock market volatility and average idiosyncratic stock volatility jointly forecast stock returns. In this paper, we quantify the economic significance of their results from the perspective of a portfolio manager. That is, we evaluate the performance, e.g., the Sharpe ratio and Jensen's alpha, of a mean-variance manager who tries to time the market based on those two variables. We find that, over the period 1968-2004, the associated market-timing strategy outperforms the buy-and-hold strategy, and the difference is statistically and economically ...
Working Paper
Foreign exchange volatility is priced in equities
This paper finds that standard asset pricing models fail to explain the significantly positive delta hedging errors from writing options on foreign exchange futures. Foreign exchange volatility does influence stock returns, however. The volatility of the JPY/USD exchange rate predicts the time series of stock returns and is priced in the cross-section of stock returns. Foreign exchange volatility risk might be priced because of its relation to foreign exchange level risk. ; Earlier title: Is foreign exchange delta hedging risk priced?