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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A New Test for the Detection of the Pricing Role of Aggregate Idiosyncratic Risk in the Predictive Regression
Tony Ruan,Qian Sun,Yexiao Xu +2 more
TL;DR: In this article, the authors propose a simple regression-based method that can, under certain conditions, substantially improve the power of the test when economically important alternative hypotheses are true, but sacrifices little in the test for the improved power.
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Mutual Fund Separation and the Fama, French, Carhart Factors
TL;DR: In this paper, the authors estimate a mean-variance efficient (MVE) portfolio assuming that the MVE frontier is spanned by optimal portfolios that fund managers offer to heterogeneous investors.
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Mutual Fund Performance in the Era of High-Frequency Trading
Nan Qin,Vijay Singal +1 more
TL;DR: The authors showed that the intensity of high-frequency trading (HFT) in stocks held by mutual funds is negatively related to fund performance and this negative relation can largely be explained by the illiquidity premium: HFT-intensive stocks provide lower returns because the majority of these stocks are relatively liquid.
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The Information Value of Stock Lending Fees: Are Lenders Price Takers?
TL;DR: In this paper, the authors find that higher stock lending fees predict significantly lower future returns after controlling for shorting demand for U.S. stocks during the period 2007-2010.
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The Information Content of Options Around Seasoned Equity Offerings
TL;DR: In this article, the authors explore the information content of option implied volatility around the announcements and issue dates of Seasoned Equity Offerings (SEOs) and find that higher demand for put options is significantly related to larger issue discounts which is consistent with the manipulative trading hypothesis.
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.