We propose a measure for extreme downside risk (EDR) to investigate whether bearing such a risk is rewarded by higher expected stock returns. By constructing an EDR proxy with the left tail index in the classical generalized extreme value distribution, we document a significantly positive EDR...

This study proposes a new price impact ratio as an alternative to the widely used Amihud’s (2002) Return-to-Volume ratio. We demonstrate that the new price impact ratio, which is deemed Return-to-Turnover ratio, has a number of appealing features. Using daily data from all stocks listed on the...

We show that in the presence of non-zero pricing errors, the Fama–MacBeth (FM) cross-sectional regression test is very likely to either reject the Capital Asset Pricing Model (CAPM) when it (almost) holds or accept the model when it grossly fails. We investigate the case when pricing errors...

This study investigates another calendar anomaly the literature does not yet address – the week-of-the-year (WOY) effect. Using the weekly returns on the stock market indexes of 20 countries worldwide, for a period that ends in December 2010, the findings demonstrate that returns in Week 44,...

This paper concerns with the effects of including a low-variance factor in an asset pricing model. When a low-variance factor is present, the commonly applied Fama–MacBeth two-pass regression procedure is very likely to yield misleading results. Local asymptotic analysis and simulation...

Using intraday data, we identify the intensity of private information flow in the U.S. Treasury market. Our results show that the intensity of private information flow is highly correlated with public information shocks and higher for longer maturity bonds. More importantly, we find that bond...

This paper estimates how the shape of the implied volatility smile and the size of the variance risk premium relate to parameters of GARCH-type time-series models measuring how conditional volatility responds to return shocks. Markets in which return shocks lead to large increases in conditional...

Using a portfolio of Dow Jones Industrial Average index constituents and the index ETF, we document significant intraday deviations from the law of one price. These are especially pronounced at very short time intervals. The extent of deviations is related to volatility, liquidity, and...

This article predicts the relative performance of hedge fund investment styles using time-varying conditional stochastic dominance tests. These tests allow for the construction of dynamic trading strategies based on nonparametric density forecasts of hedge fund returns. During the recent...

It is a commonly held view that gold protects investors’ wealth in the event of negative economic conditions. In this study, we test whether other metals offer similar or better investment opportunities in periods of market turmoil. Using a sample of 13 sovereign bonds, we show that other...