We show that firms' idiosyncratic volatility obeys a strong factor structure and that shocks to the common factor in idiosyncratic volatility (CIV) are priced. Stocks in the lowest CIV-beta quintile earn average returns 5.4% per year higher than those in the highest quintile. The CIV factor...

We study the pricing of uncertainty shocks using a wide-ranging set of options that reveal premia for macroeconomic risks. Portfolios hedging macro uncertainty have historically earned zero or even significantly positive returns, while those exposed to the realization of large shocks have earned...

We propose an approach to measuring the state of the economy via textual analysis of business news. From the full text of 800,000 Wall Street Journal articles for 1984-2017, we estimate a topic model that summarizes business news into interpretable topical themes and quantifies the proportion of...

We study the use of stochastic discount factor (SDF) models in evaluating the investment performance of portfolio managers. By constructing artificial mutual funds with known levels of investment ability, we evaluate a large set of SDF models. We find that the measures of performance are not...

This paper evaluates persistence in the performance of institutional equity managers. We build on recent work on conditional performance evaluation, using time-varying conditional expected returns and risk measures. We find evidence that the investment performance of pension fund managers...

This paper empirically examines multifactor asset pricing models for the returns and expected returns on eighteen national equity markets. The factors are chosen to measure global economic risks. Although previous studies do not reject the unconditional mean- variance efficiency of a world...