Essays on Asset Pricing

This thesis considers three major issues in the research field of asset pricing: Market efficiency, the equity premium puzzle and the cross-section of stock returns. Overall the thesis consists of three essays where all of them are mainly empirical. These essays are individual studies and focus on different research questions related to asset pricing. Although different in focus and approach the three essays contribute to a better understanding of central asset pricing issues. The research question of the first essay is twofold. First we analyze how efficiently do financial markets incorporate information about the announcement of stock buy-backs into market prices. Second we verify the motivation of stock buy-backs and test if these motives are robust across industries. The second essay of the thesis addresses the equity premium puzzle by modifying the Consumption Capital Asset Pricing Model (CCAPM) in a fairly simple way; by finding variables to instrument consumption. In the third essay we attempt to explain the differences in the cross section of stock returns by using bond factors and macroeconomic risks. The methodology of these essays is largely based on methods from the fields of microeconomics, macroeconomics and financial econometrics.