We show that firms' idiosyncratic volatility in returns and cash flows obeys a strong factor structure. We find that the stocks of firms with large, negative common idiosyncratic volatility (CIV) factor betas earn high average returns. The CIV beta quintile spread is 6.4% per year. To explain...

We find that average returns to currency carry trades decrease signicantly as the maturity of the foreign bonds increases, because investment currencies tend to have small local bond term premia. The downward term structure of carry trade risk premia is informative about the temporal nature of...

We propose a network model of firm volatility in which the customers' growth rate shocks influence the growth rates of their suppliers, larger suppliers have more customers, and the strength of a customer-supplier link depends on the size of the customer firm. Even though all shocks are i.i.d.,...