This dissertation consists of two chapters. The first chapter shows that the measurement errors in betas for stocks induce corresponding measurement errors in alphas and a spurious negative covariance between the estimated betas and alphas across stocks. This negative covariance between the...

The well-documented negative relationship between idiosyncratic volatility and stock returns is puzzling if investors are risk-averse. However, under prospect theory, while investors are risk-averse in the domain of gains, they exhibit risk-seeking behavior in the domain of losses. Consistent...

We test the dynamic aspects of the loss aversion feature of Kahneman and Tversky (1979) and find that idiosyncratic volatility is negatively associated with unrealized gains of stock returns. Moreover, we show that this negative relationship is stronger for stocks with high individual investors'...

We study the interrelation between the size and winner-loser effects in U.S. stock re-turns, including their response to extreme returns. We find that size effect and winner-loser effect are present in data up to 2017. These are related but separate effects. How-ever these effects are due to...