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The Cross-Section of Volatility and Expected Returns
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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
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The Return of the Size Anomaly: Evidence from the German Stock Market
TL;DR: In this article, the authors examined the size effect in the German stock market and found that the marginal effect of the size of a firm on stock returns is conditional on the firm's past performance.
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Idiosyncratic Volatility, Momentum, Liquidity, and Expected Stock Returns in Developed and Emerging Markets
Lorne N. Switzer,Alan Picard +1 more
TL;DR: In this paper, the authors examined the link between idiosyncratic risk and expected returns for a large sample of firms in both developed and emerging markets using Fama-French three-factor models.
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Switching Risk Off: FX Correlations and Risk Premia
TL;DR: In this article, the authors identify these episodes using the switch to a polarized correlation regime of foreign-exchange returns and show that risk-off transitions are associated with significant changes in the positions of professional investors across different futures markets.
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Indexing and Stock Price Efficiency
Nan Qin,Vijay Singal +1 more
TL;DR: In this article, the effect of indexing on the efficiency of stock prices is investigated and the authors conjecture that reduced incentives for information acquisition and arbitrage induced by indexing and passive trading are probably the main causes for degradation in price efficiency.
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Equity Returns and Idiosyncratic Volatility: UK Evidence
TL;DR: In this article, the authors examined the predictive ability of various measures of idiosyncratic risk and provided evidence which suggests that it is the idiosyncratic volatility of small capitalization stocks that matters for asset pricing.
References
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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.