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...

Drawing upon more than 12 million observations over the period from 1996 to 2020, we find that allowing for nonlinearities significantly increases the out-of-sample performance of option and stock characteristics in predicting future option returns. Besides statistical significance, the...

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...

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...

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...

This paper compares forecasts of real economic growth from models based on the stock market and bond market data. Although both contain information relevant for predicting GNP growth, the bond market delivers more accurate predictions. The bond market predictions are compared to the forecasts of...

One version of the consumption-based asset pricing model implies a linear relation between expected returns and expected consumption growth. This paper provides evidence that the expected real term structure contains information that can be used to forecast consumption growth. The evidence is...

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...