Open AccessPosted Content
The Cross-Section of Volatility and Expected Returns
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
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Contagion Channels between Real Estate and Financial Markets
TL;DR: In this paper, the authors conducted an empirical investigation of the channels underlying the risk of contagion between real estate (i.e., REITs) and financial markets in the United States.
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Option Return Predictability
TL;DR: The cross-section of delta-hedged equity option returns can be predicted by a variety of underlying stock characteristics and firm fundamentals including idiosyncratic volatility, past stock returns, profitability, cash holding, new share issuance, and dispersion of analyst forecasts as discussed by the authors.
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The Systematic Risk of Idiosyncratic Volatility
TL;DR: In this article, the authors show that the pricing of idiosyncratic volatility is due to unaccounted systematic risk, which affects a large number of asset pricing anomalies, and propose the return difference between stocks with high and low predicted IV, PIV, as a proxy for the missing risk factor.
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Crash Sensitivity and the Cross-Section of Expected Stock Returns
TL;DR: In this paper, the authors examined whether investors receive compensation for holding crash-sensitive stocks and found that stocks with weak LTD serve as a hedge during crises, but, overall, stocks with strong LTD have higher average future returns.
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Speculative Trading and Stock Returns
Li Pan,Ya Tang,Jianguo Xu +2 more
TL;DR: In this paper, the effect of speculative trading on stock returns in Chinese stock market was investigated. And they found a significantly negative relationship between abnormal turnover and future returns, while past average turnover does not predict returns.
References
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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.
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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.
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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.
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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.
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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.