I show that, due to imperfect risk sharing, aggregate shocks to uncertainty about idiosyncratic return on investment … generate economic contractions with elevated risk premia and a decrease in the risk-free rate. I present a tractable real … capital, and the equity premium are the same as in a model without idiosyncratic risk, but with time-preference shocks. That …

Although the lack of international portfolio diversification has long interested the financial economics literature … introduce a microeconomic aspect of under-diversification by examining a new data on U.S.-based mutual fund families' global … diversification. I document the fund families' investments in global equity markets and explore features of supply and demand in the …

underpricing and strategic disclosure as potential hedges against litigation risk. This tradeoff explains a significant fraction of …. Underwriters who fail to adequately hedge litigation risk experience economically large penalties including loss of market share. …

Recent empirical evidence suggests that the variance risk premium, or the difference between risk-neutral and … similar to the pattern previously documented for the U.S. Defining a "global" variance risk premium, we uncover even stronger … compensation for world-wide variance risk to be the same across countries. Our findings are broadly consistent with the …

High-powered incentives may induce higher managerial effort, but they also expose managers to idiosyncratic risk. If … managers are risk averse, they might underinvest when firm-specific uncertainty increases, leading to suboptimal investment … decisions from the perspective of well-diversified shareholders. We empirically document that when idiosyncratic risk rises …

We find that firm-level variance risk premium, estimated as the difference between option-implied and expected … variances, has a prominent explanatory power for credit spreads in the presence of market- and firm-level risk control variables … provide further evidence that: (1) variance risk premium has a cleaner systematic component and Granger-causes implied and …

portfolio size and degree of risk aversion of potential investors, the ability to borrow, and the hedging opportunities provided …