Richard Priestley

Journal of Financial and Quantitative Analysis 51(4) p. 1111-1133 Doi: https://doi.org/10.1017/S002210901600048X

The finance literature documents a relation between labor income and the cross-section of stock returns. One possible explanation for this is the hedg-ing decisions of investors with relative wealth concerns. This implies a negative risk premium associated with stock returns correlated with local undiversi able wealth, since investors are willing to pay more for stocks that help their hedging goals. We nd evidence that is consistent with these regularities. In addition, we show that the e ect varies across geographic areas depending on the size and variability of undiversi able wealth, proxied by labor income.

Review of Finance 17(3) p. 1029-1064 Doi: https://doi.org/10.1093/rof/rfs014

We study the predictability of stock returns using a pure macroeconomic mea- sure of the world business cycle, namely the world's capital to output ratio. This variable tracks variation in expected stock returns in a group of the major industrial economies in the presence of world nancial market based predictor variables. The world's capi- tal to output ratio exhibits strong out-of-sample predictive power in almost all countries studied. This is in contrast to nancial market based variables that almost never have out-of-sample forecasting power. Using the stock return predictability that we uncover, we nd that international versions of conditional asset pricing models perform well. The world capital to output ratio also predicts bond returns, interest rate changes and credit spreads. The results highlight the importance of world business conditions for nancial markets.

Management science 58(10) p. 1834-1853 Doi: https://doi.org/10.1287/mnsc.1120.1528

The relative predictability of returns and dividends is a central issue since it forms the paradigm to interpret asset price variation. A little studied question is how dividend smoothing, as a choice of corporate policy, a ects predictability. We show that, even if dividends are supposed to be predictable without smoothing, dividend smoothing can bury this predictability. Since aggregate dividends are dramatically more smoothed in the postwar period than before, the lack of dividend growth predictability in the postwar period does not necessarily mean that there is no cash ow news in stock price variations; rather, a more plausible interpretation is that dividends are smoothed. Using two alternative measures that are less subject to dividend smoothing {net payout and earnings { we reach the consistent conclusion that cash ow news plays a more important role than discount rate news in price variations in the postwar period.

Journal of Economic Dynamics and Control 36(10) p. 1600-1625 Doi: https://doi.org/10.1016/j.jedc.2012.05.006

This paper shows that portfolio constraints have important implications for manage- ment compensation and performance evaluation. In particular, in the presence of portfolio constraints, allowing for benchmarking can be bene cial. Benchmark design arises as an al- ternative e¤ort inducement mechanism vis-a-vis relaxing portfolio constraints. Numerically, we solve jointly for the manager s linear incentive fee and the optimal benchmark. The size of the incentive fee and the risk adjustment in the benchmark composition are increasing in the investor s risk tolerance and the manager s ability to acquire and process private information.

Journal of Financial and Quantitative Analysis 47(5) p. 1003-1028 Doi: https://doi.org/10.1017/S0022109012000427

The relative predictability of returns and dividends is a central issue since it forms the paradigm to interpret asset price variation. A little studied question is how dividend smoothing, as a choice of corporate policy, affects predictability. We show that, even if dividends are supposed to be predictable without smoothing, dividend smoothing can bury this predictability. Since aggregate dividends are dramatically more smoothed in the postwar period than before, the lack of dividend growth predictability in the postwar period does not necessarily mean that there is no cash flow news in stock price variations; rather, a more plausible interpretation is that dividends are smoothed. Using two alternative measures that are less subject to dividend smoothing -- net payout and earnings -- we reach the consistent conclusion that cash flow news plays a more important role than discount rate news in price variations in the postwar period.

Journal of Financial Economics 101(1) p. 182-205 Doi: https://doi.org/10.1016/j.jfineco.2011.02.002

The spread in average returns between low and high asset growth and investment portfolios is largely accounted for by their spread in systematic risk, as measured by the Chen, Roll and Ross (1986) factors. In addition, systematic risk and volatility fall sharply during large investment periods. Consistent with the predictions of both the q-theory and real options models, the systematic risk spread and fall in risk and volatility are largest for high q rms. Moreover, investment and asset growth factors can predict economic growth. Our evidence implies that much of negative investment (asset growth)-future returns relationship can be explained by rational pricing.

The Review of financial studies 22(7) p. 2801-2833 Doi: https://doi.org/10.1093/rfs/hhn087

Journal of Finance 64(6) p. 2703-273

Journal of International Money and Finance 26 p. 1016-1037

Journal of International Money and Finance 26(2) p. 305-327

The journal of business 79(1) p. 365-392

The launch of the single currency in Europe in January 1999 was preceded by a period of regulatory harmonization, convergence in bond yields and inflation rates, and strict fiscal policy across the Eurozone countries. We examine whether the 1990s also were characterized by increased stock market integration. The results indicate that, as forward interest differentials benchmarked against Germany and inflation differentials benchmarked against the three best performing states shrank toward zero, stock markets converged toward full integration. The United Kingdom, a country that chose not to enter the Eurozone, shows no such increase in stock market integration.

Journal of International Money and Finance 23(1) p. 71-97

Economics Letters 82 p. 181-188

Journal of Multinational Financial Management 12(1) p. 21-40

Journal of Banking & Finance 25(7) p. 1271-1286

International Journal of Finance and Economics 5 p. 93-106

Journal of Fixed Income 9(March) p. 61-73

Journal of Business Finance & Accounting 27(7/8) p. 933-952

Journal of Financial and Quantitative Analysis 35(2) p. 173-189

Journal of Empirical Finance 6(4) p. 355-384

Journal of Banking & Finance 22(9) p. 1207-1229

Journal of International Money and Finance 17(6) p. 949-966

Pacific-Basin Finance Journal 6(1-2) p. 103-114

Ekonomia 2(2) p. 145-154

Journal of Empirical Finance 5(3) p. 221-240

Journal of futures markets 18(2) p. 151-166

Seminar at IE Business School

Handelshøyskolen BI

Handelshøyskolen BI

The 2009 Winter Conference on Business Intelligence

35th EFA Annual Meeting

35TH EFA Annual Meeting

Handelshøyskolen BI

To date little is known about how long equity ownership lasts, what determines its length, and whether ownership duration is related to rm performance. Using a unique time series of equity holdings over eleven years, we nd that on average the rm's largest owner stays less than three years and stays longer than owners with smaller stakes. The duration of nancial institutions and foreigners is shorter than that of individuals and industrial rms. We show that ownership duration is duration dependent as the probability of closing an equity position is a function of how long the owner has held the stake. Ownership duration appears to match the duration of the rm's investment projects. We nd no evidence that large owners vote by foot in the sense that bad news about earnings leads to duration ending. There is a negative relationship between ownership duration and a rm's performance in general, but the sign and strength of this relationship di ers across owner types. Long duration by nancial institutions and industrial corporations is negatively related to performance, whereas the opposite is true for individuals. This suggests that long term ownership may improve rm performance if the monitoring is direct as opposed to delegated.