This paper investigates how the stock market reacts to firm level liquidity shocks. We find that negative and persistent liquidity shocks not only lead to lower contemporaneous returns, but also predict negative returns for up to six months in the future. Long-short portfolios sorted on past...

Stocks with large increases in call implied volatilities over the previous month tend to have high future returns while stocks with large increases in put implied volatilities over the previous month tend to have low future returns. Sorting stocks ranked into decile portfolios by past call...

This paper examines the proportion of wealth invested in stock and bond portfolios as a function of the investors' age, i.e., investment horizon. It has become increasingly popular to advice investors to relocate their funds from a primarily stock portfolio to a primarily bond portfolio as they...

We show that stocks that experience a sudden increase in idiosyncratic volatility earn abnormally high contemporaneous returns but significantly underperform otherwise similar stocks in the future. Our findings indicate that volatility shocks can be traced to unusual firm-level news. We...

We show that stocks that experience a sudden increase in idiosyncratic volatility earn abnormally high contemporaneous returns but significantly underperform otherwise similar stocks in the future. Our findings indicate that volatility shocks can be traced to unusual firm-level news. We...

This paper presents a comprehensive study of continuous time GARCH modeling with the thin-tailed normal and the fat-tailed Student-t and generalized error distributions. The paper measures the degree of mean reversion in stock return volatility based on the relationship between discrete time...

This paper examines the returns to investment strategies based on the interactions between value-to-market indicators and corporate financing transactions that increase or decrease the firm's outstanding equity, i.e., equity issues and repurchases. Portfolio-level analyses and firm-level...

We introduce a new, hybrid measure of stock return tail covariance risk, motivated by the under-diversified portfolio holdings of individual investors, and investigate its cross-sectional predictive power. Our key innovation is that this covariance is measured across the left tail states of the...

This paper investigates the extent to which market risk, residual risk, and tail risk explain the cross-sectional dispersion in hedge fund returns. The paper introduces a comprehensive measure of systematic risk (SR) for individual hedge funds by breaking up total risk into systematic and...

A conditional asset pricing model with risk and uncertainty implies that the time-varying exposures of equity portfolios to the market and uncertainty factors carry positive risk premiums. The empirical results from the size, book-to-market, and industry portfolios as well as individual stocks...