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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Macroeconomic Uncertainty and Corporate Bond Returns
TL;DR: This article examined the role of macroeconomic uncertainty in the cross-section of corporate bonds and found a significant uncertainty premium for both investment-grade (0.40% per month) and non-investment-grade bonds.
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The Asset Growth Anomaly and the Role of Limits to Arbitrage
F.Y. Eric C. Lam,Kuo-Chiang Wei +1 more
TL;DR: This article examined the role of the limits to arbitrage in the negative effect of capital investment or asset growth on subsequent stock returns and found that the effect is more pronounced when there are more severe limits on arbitrage.
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Corporate Bond Prices and Idiosyncratic Risk: Evidence from Australia
TL;DR: In this paper, the authors investigate the impact of idiosyncratic risk on the bond price of a firm on the information arrival of firm-specific risk and find that idiosyncratic volatility does not affect bond prices, while the direction of risk which reflects the favorable or unfavorable information exhibits impacts on bond prices.
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Returns for Dividend-Paying and Non-Dividend Paying Firms
Yufen Fu,George Blazenko +1 more
TL;DR: In this paper, the authors compare the equity returns of dividend-paying and non-dividend paying firms and find no unconditional return difference even though non-DPA firms have many characteristics that suggest high risk.
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The Power of Equity Factor Diversification
TL;DR: In this paper, the authors analyzed the diversification properties of country equity factors across six equity factors and twenty developed markets from 1991 to 2015 and found substantial diversification benefits along the country dimension as well as the factor dimension.
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.