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
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The Contributions of Betas versus Characteristics to the ESG Premium
TL;DR: This paper used two global data sets from 2004-2018 to identify the separate contributions of ESG betas and ESG characteristics for explaining variation in expected returns, and revealed that ESG factors mainly explain variation of expected returns.
Journal ArticleDOI
Give Credit Where Credit is Due: What Explains Corporate Bond Returns?
TL;DR: In this article, the authors analyzed the risk and returns of US corporate bond indices using a set of economically-motivated factors and found that options markets explain a great deal of credit returns.
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Monetary Policy Surprises, Investment Opportunities, and Asset Prices
TL;DR: In this paper, the authors proposed an asset pricing model with the market return and a mimicking portfolio for monetary policy shocks measured on days of FOMC announcements. But, the model is not suitable for the case of large-scale changes in monetary policy.
ReportDOI
Equity Market Volatility and Expected Risk Premium
TL;DR: This paper revisited the time-series relation between the conditional risk premium and variance of the equity market portfolio and found strong support for a positive risk-return tradeoff, and this result is not sensitive to a number of robustness checks, including alternative proxies of the conditional stock variance and controls for hedging demands.
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The Role of Information Intermediaries in Financial Markets
TL;DR: The authors found that announcements containing bad news are longer and less focused on the originating company than good news and that news agencies step in and cut through the packaging by reporting bad company news in a much more concise and focused way.
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.