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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
Citations
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The Risk Effects of Acquiring Distressed Firms
TL;DR: In this paper, the authors examined whether the risk effects of acquiring distressed targets are fundamentally different and investigated possible explanations for any dissimilarities and found that the increase in bidder default risk is substantially larger when acquiring distressed firms.
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The Skewness of Commodity Futures Returns
TL;DR: In this article, the relationship between the skewness of commodity futures returns and expected returns was studied, showing that a trading strategy that takes long positions in commodity futures with the most negative skew and shorts those with the more positive skew generates significant excess returns that remain after controlling for exposure to well-known risk factors.
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Differences in Expectations and the Cross Section of Stock Returns
TL;DR: In this paper, the authors provide strong evidence that differences in expectations among options investors, measured from the dispersion of equity options trading volume across moneyness levels, contain valuable information about future stock returns.
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Underconfidence, Pessimism and the Low-Beta Anomaly
Soosung Hwang,Mark Salmon +1 more
TL;DR: In this paper, the authors proposed a non-parametric measure of herding called beta herding, by incorporating the interaction between sentiment and herding in standard linear factor models.
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Is there a Distress Risk Anomaly? Pricing of Systematic Default Risk in the Cross Section of Equity Returns
Deniz Anginer,Celim Yildizhan +1 more
TL;DR: This article used risk premium computed from corporate credit spreads to measure a firm's exposure to systematic variation in default risk and found that stocks with higher credit risk premia have higher expected equity returns which are largely explained by the market factor.
References
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Posted Content
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The Impact of Jumps in Volatility and Returns
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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.