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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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Skewness Preference and Seasoned Equity Offers
Don M. Autore,Jared DeLisle +1 more
TL;DR: In this paper, the degree of expected idiosyncratic skewness in seasoned equity stock returns is an important determinant of flotation costs and post-issue abnormal stock performance, and the results suggest that skewnness-induced overpricing increases the flotation cost of seasoned equity offers and leads to poor post- issue stock performance.
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Volatility Risks and Growth Options
Hengjie Ai,Dana Kiku +1 more
TL;DR: In this article, the authors measure growth opportunities by firms' exposure to idiosyncratic volatility news and show that price sensitivity to variation in idiosyncratic variance carries significant information about firms' future investment and growth even after controlling for conventional proxies of growth options.
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FIEGARCH-M and and International Crises: A Cross-Country Analysis
TL;DR: This article applied fractionally integrated exponential GARCH with volatility-in-mean (FIEGARCH-M) model to estimate the risk premium after different crises occurred in major stock markets during the past two decades.
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High Short Interest Effect and Aggregate Volatility Risk
Alexander Barinov,Julie Wu +1 more
TL;DR: In this article, a risk-based firm-type explanation on why stocks of firms with high relative short interest (RSI) have lower future returns has been proposed, arguing that these firms have negative alphas because they are a hedge against expected aggregate volatility risk.
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The Impact of Asymmetry on Expected Stock Returns: An Investigation of Alternative Risk Measures
TL;DR: It is found that, although investors seem to be compensated for total risk, measures of downside risk are better at explaining future returns, and when comparing downside risk to upside risk, investors are more concerned about downside risk.
References
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The Capital Asset Pricing Model: Some Empirical Tests
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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.