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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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Company-Specific Risk Premiums: Update on the Scholarly Evidence
David C. Smith,Brian Calvert +1 more
TL;DR: A comprehensive and up-to-date synthesis of empirical studies examining company-specific risk premiums (CSRPs) is provided in this paper. But, the most recent empirical evidence does not support the assertions of some practitioners that the CSRP should be included in the cost of capital.
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Time-Varying Demand for Lottery: Speculation Ahead of Earnings Announcements
TL;DR: In this paper, the authors show that the demand for lottery-like stocks is stronger ahead of earnings announcements, leading to a price run-up for these stocks, and that this inverted-V-shaped pattern on cumulative return spreads is more pronounced among firms with a greater retail order imbalance and in regions with a stronger gambling propensity.
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Idiosyncratic Volatility of Small Public Firms and Entrepreneurial Risk
TL;DR: In this article, the authors show that the average idiosyncratic volatility of small public firms is a positive predictor of future stock returns and that expected returns are increasing functions of entrepreneurial risk, and therefore returns are predictable using proxies for this risk.
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The Role of Realised Volatility in the Athens Stock Exchange
TL;DR: In this article, a newly developed dataset of daily, value-weighted market returns was used to construct and analyze the monthly realized volatility of the Athens Stock Exchange (A.S.E.) from 1985 to 2003.
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The Conservative Formula: Quantitative Investing Made Easy
Pim van Vliet,David Blitz +1 more
TL;DR: In this article, the authors propose a conservative investment formula which selects 100 stocks based on three criteria: low return volatility, high net payout yield, and strong price momentum, and show that this simple formula gives investors full and efficient exposure to the most important factor premiums, and thus effectively summarizes half a century of empirical asset pricing research into one easy to implement investment strategy.
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
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Intertemporal Asset Pricing Without Consumption Data
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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.