Open AccessPosted Content
The Cross-Section of Volatility and Expected Returns
Reads0
Chats0
TLDR
This paper examined the pricing of aggregate volatility risk in the cross-section of stock returns and found that stocks with high sensitivities to innovations in aggregate volatility have low average returns, and that stock with high idiosyncratic volatility relative to the Fama and French (1993) model have abysmally low return.Abstract:
We examine the pricing of aggregate volatility risk in the cross-section of stock returns Consistent with theory, we find that stocks with high sensitivities to innovations in aggregate volatility have low average returns In addition, we find that stocks with high idiosyncratic volatility relative to the Fama and French (1993) model have abysmally low average returns This phenomenon cannot be explained by exposure to aggregate volatility risk Size, book-to-market, momentum, and liquidity effects cannot account for either the low average returns earned by stocks with high exposure to systematic volatility risk or for the low average returns of stocks with high idiosyncratic volatilityread more
Citations
More filters
Posted Content
Oil Price Risk Exposure and the Cross-Section of Stock Returns: The Case of Net Exporting Countries
TL;DR: In this paper, the authors examined whether oil price risk is systematically priced in the cross-section of stock returns in net oil-exporting countries even after controlling for market and firm-level risk factors.
Journal ArticleDOI
Investor Sentiment, Beta, and the Cost of Equity Capital
TL;DR: In this article, the authors hypothesize that periods of optimism attract equity investment by unsophisticated, overconfident traders in risky opportunities (high beta stocks), while such traders stay along the sidelines during pessimistic periods.
Journal ArticleDOI
What Do Stock Markets Tell Us About Exchange Rates
TL;DR: The authors found that exchange rate movements are in fact unrelated to differentials in country-level equity returns, and that a trading strategy that invests in countries with the highest expected equity returns and shorts those with the lowest generates substantial returns and Sharpe ratios.
Journal ArticleDOI
Does Tax Risk Affect Investor Valuation of Tax Avoidance
TL;DR: In this paper, the authors examine how investors value tax avoidance and tax risk and how these constructs interact to influence firm value, and they find that while disclosures of uncertain tax positions are informative to investors, they are generally associated with firm value incremental to (rather than as a substitute for) cash ETR-based measures of tax avoidance.
Journal ArticleDOI
Dissecting Characteristics Nonparametrically
TL;DR: The authors proposed a nonparametric method to study which characteristics provide incremental information for the cross-section of expected returns, and used adaptive group LASSO to select characteristics and to estimate how they affect expected returns nonparametrically.
References
More filters
Posted Content
The Capital Asset Pricing Model: Some Empirical Tests
TL;DR: In this paper, the authors present some additional tests of the mean-variance formulation of the asset pricing model, which avoid some of the problems of earlier studies and provide additional insights into the nature of the structure of security returns.
Posted Content
No News is Good News: An Asymmetric Model of Changing Volatility in Stock Returns
TL;DR: In this paper, the generalized autoregressive conditionally heteroskedastic (GARCH) model of returns is modified to allow for volatility feedback effect, which amplifies large negative stock returns and dampens large positive returns, making stock returns negatively skewed and increasing the potential for large crashes.
Journal ArticleDOI
The Impact of Jumps in Volatility and Returns
TL;DR: In this article, the authors examined a class of continuous-time models that incorporate jumps in returns and volatility, in addition to diffusive stochastic volatility, and developed a likelihood-based estimation strategy and provided estimates of model parameters, spot volatility, jump times and jump sizes using both S&P 500 and Nasdaq 100 index returns.
Posted Content
Intertemporal Asset Pricing Without Consumption Data
TL;DR: In this article, a new way to generalize the insights of static asset pricing theory to a multi-period setting is proposed, which uses a loglinear approximation to the budget constraint to substitute out consumption from a standard intertemporal asset pricing model.
Journal ArticleDOI
Liquidity Risk and Expected Stock Returns
TL;DR: This article investigated whether market-wide liquidity is a state variable important for asset pricing and found that expected stock returns are related cross-sectionally to the sensitivities of returns to fluctuations in aggregate liquidity.