This paper develops a semiautoregression approach to estimate factors of the arbitrage pricing theory that has the advantage of providing a simple asymptotic variance-covariance matrix for the factor estimates, which makes it easy to adjust for measurement errors. Using the extracted factors, the author confirms the finding that the arbitrage pricing theory describes asset returns slightly better than the capital asset pricing model, although there is still some mispricing in the arbitrage pricing theory model. The author finds that not only are the factors priced by the market, but the factor premiums move over time in relation to business cycle variables.

This article develops a new framework for measuring financial and real economic linkages between countries. Using U.S. and U.K. data from 1957 to 1989, the authors find closer financial linkages after the Bretton Woods currency arrangement was abandoned and Britain suspended exchange controls. In a pairwise application to fifteen countries over a shorter period, they also find that news about future dividend growth is more highly correlated between countries than contemporaneous output measures. This suggests that there are lags in the international transmission of economic shocks and that contemporaneous output correlation may understate the magnitude of integration.

This paper developes a semiautoregression (SAR) approach to estimate factors of the arbitrage pricing theory (APT) that has the advantage of providing a simple asymptotic variance‐covariance matrix for the factor estimates, which makes it easy to adjust for measurement errors. Using the extracted factors, I confirm the finding that the APT describes asset returns slightly better than the CAPM, although there is still some mispricing in the APT model. I find that not only are the factors “priced” by the market, but the factor premiums move over time in relation to business cycle variables.

This study employs a new data set from art auctions to examine the relationship between auctioneer presale price estimates and the long‐term performance of artworks. We find that the price estimates for expensive paintings have a consistent upward bias over a long period of 30 years. High estimates at the time of purchase are associated with adverse subsequent abnormal returns. Moreover, the estimation error for individual paintings tends to persist over time. These results are consistent with the view that auction house price estimates are affected by agency problems and that some investors are credulous.

This article develops a new framework for measuring financial and real economic linkages between countries. Using United States and United Kingdom data from 1957 to 1989, we find closer financial linkages after the Bretton Woods currency arrangement was abandoned and Britain suspended exchange controls. In a pairwise application to fifteen countries over a shorter period, we also find that news about future dividend growth is more highly correlated between countries than contemporaneous output measures. This suggests that there are lags in the international transmission of economic shocks and that contemporaneous output correlation may understate the magnitude of integration.