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In this article, we revisit the Friday the 13th effect discussed by Kolb and Rodriguez (1987) that has received increased interest in recent research. Using a dummy-augmented GARCH model, we investigate whether the occurrence of this superstitious calendar day has significant impact on the conditional means and variances of returns in the seven emerging Asian stock markets India, Indonesia, Malaysia, the Philippines, South Korea, Taiwan and Thailand. Results obtained for the period from July 1996 to August 2013 indicate no systematic pattern across countries. We can detect a significant Friday the 13th effect only for mean returns in the Philippines and an inverse Friday the 13th effect for South Korea. Volatilities are significantly affected only in Indonesia and the Philippines. They tend to be reduced by the occurrence of Friday the 13th.

AbstractIn this article, we analyse whether the prominent habit formation model ofCampbell and Cochrane (1999)can explain the cross‐section of the G7 equity risk premia when formulated under the assumption of complete capital market integration. We test the conditional covariance representation of the model using a combined GARCH and GMM approach in the spirit ofBali (2008)and find that in comparison to the CAPM and the standard power utility CCAPM the habit model has superior explanatory power. It explains more than 90% of the cross‐sectional variation in risk premia. Overall, our findings suggest that global consumption‐based recession indicators and not returns of reference portfolios are key risk factors driving equity risk premia.

SummaryThis paper analyses whether the consumption based capital asset pricing model is consistent with asset return data from Denmark, Italy, Norway and Austria. The performance of the CCAPM is evaluated by applying the nonparametric methodology of Hansen and Jagannathan (1991) and adopting five alternative specifications of utility. In addition to standard power utility the recursive preferences model proposed by Epstein and Zin (1989) is adopted. Both internal and external habit formation (persistence) using the models proposed by Constantinides (1990), Abel (1990) and Campbell and Cochrane (1999) are also considered. The findings are evaluated using the test of Burnside (1994) and the pricing error measure of Hansen and Jagannathan (1997). It is found that the majority of models produce stochastic discount factors consistent with the data (at mostly low degrees of risk aversion). As far as the pricing errors of the models are concerned the model incorporating recursive utility can be considered best.

AbstractMotivated by significant changes in the dynamics of crude oil markets, we revisit the question of whether crude oil futures are a valuable addition to typical stock and bond portfolios. To answer this question, we use a mean‐variance framework with established heuristic and classic weighting schemes and, in addition, derive optimal asset weights based on forward‐looking estimates of expected returns (via univariate forecast combinations and multivariate LASSO regressions) and covariances (via DCC‐GARCH and GO‐GARCH models). We find that crude oil futures tend to be of limited benefit for investors. In recent data, their optimal weights are very low and they typically do not enhance out‐of‐sample portfolio performance. These findings hold in a variety of robustness checks with respect to different datasets, estimation windows, regression specifications, GARCH models, and transaction costs.