JFQ volume 39 issue 1 Front matter
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JFQ volume 39 issue 3 Front matter
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JFQ volume 39 issue 2 Front matter
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JFQ volume 39 issue 4 Cover and Front matter
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JFQ volume 39 issue 3 Back matter
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JFQ volume 39 issue 1 Back matter
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JFQ volume 39 issue 2 Back matter
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JFQ volume 39 issue 4 Cover and Back matter
Cochrane's Asset Pricing now appears in a revised edition that unifies and brings the science of asset pricing up to date.
Initial Public Offerings in Hot and Cold Markets
The literature offers many explanations for why the IPO market cycles from hot to cold. These include theories in which hot markets represent clusters of IPOs in a new industry, and signaling models that predict that hot markets draw in better quality firms. Others suggest hot market IPOs' stock returns reflect their poor quality. We compare IPOs over cycles during 1975–2000 and find that hot and cold IPO markets do not differ so much in the characteristics of the firms that go public as in the quantity of firms that go public. Both hot and cold IPOs are largely concentrated in the same narrow set of industries and they have few distinctions in profits, age, or growth potential. Our results suggest that hot markets are not driven primarily by changes in adverse selection costs, managerial opportunism, or technological innovations, but more likely reflect greater investor optimism.
The Economic Value of Predicting Stock Index Returns and Volatility
In this paper, we analyze the economic value of predicting stock index returns as well as volatility. On the basis of simple linear models, estimated recursively, we produce out-of-sample forecasts for the return on the S&P 500 index and its volatility. Using monthly data, we examine the economic value of a number of alternative trading strategies over the period 1970–2001. It appears easier to forecast returns at times when volatility is high. For a mean-variance investor, this predictability is economically profitable, even if short sales are not allowed and transaction costs are quite large. The economic value of trading strategies that employ market timing in returns and volatility exceeds that of strategies that only employ timing in returns. Most of the profitability of the dynamic strategies, however, is located in the first half of our sample period.