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We find that the Campbell–Cochrane external-habit model can generate a value premium if the persistence of the consumption surplus is sufficiently low. Such low persistence is supported by micro evidence on consumption. If the mean and conditional volatility of consumption growth are highly persistent, as in the Bansal–Yaron long-run risk model, then fast-moving habit can also generate, without eroding the value premium: i) empirically sensible long horizon return predictability; and ii) a price–dividend ratio for market equity that exhibits the high autocorrelation found in the data. Fast-moving habit also delivers several empirical properties of market-dividend strips. [ABSTRACT FROM AUTHOR]

Returns on investments are higher in high book-to-market companies and in small firms, a hedging demand. Low book-to-market securities should be sold, according to this model.

US mutual fund performance is assessed, including the impact of attrition, with a focus on methodology.

The loss in utility for a consumer who ignores any or all three problems related to transaction costs was examined. The three problems were the multi-period nature of the customer's portfolio-choice problem, documented predictability of asset returns or transaction costs. The results showed that myopic behavior or ignorance of predictability or realistic transactions costs resulted in substantial costs for the consumer.

Because a money manager learns more about her skill from her management experience than outsiders can learn from her realized returns, she expects inefficiency in future contracts that condition exclusively on realized returns. A fund family that learns what the manager learns can reduce this inefficiency cost if the family is large enough. The family's incentive is to retain any given manager regardless of her skill but, when the family has enough managers, it adds value by boosting the credibility of its retentions through the firing of others. As the number of managers grows, the efficiency loss goes to zero. [ABSTRACT FROM AUTHOR]

Comments on a paper examining the dynamic properties of an economy with periods of consumption readjustment. Effects of infrequent consumption decision-making; Modeling of consumption readjustments; Costs of consumption readjustments.