This Paper solves explicitly a simple equilibrium asset pricing model with liquidity risk – the risk arising from … various channels through which liquidity risk may affect asset prices. Our empirical results shed light on the total and …

? Can stock return predictability be explained by changes in stock market volatility? How does the mean return per unit risk … predictor of both the mean and volatility of excess stock market returns. We characterize the risk-return tradeoff as the … change over time? This chapter reviews what is known about the time-series evolution of the risk-return tradeoff for stock …

Value stocks have higher exposure to innovations in the nominal bond risk premium than growth stocks. Since the nominal … bond risk premium measures cyclical variation in the market’s assessment of future output growth, this results in a value … risk premium provided that good news about future output lowers the marginal utility of wealth today. In support of this …

commensurate with their risk aversion; more risk-averse individuals pick lower-volatility stocks. The investors' portfolio …The preferred risk habitat hypothesis, introduced here, is that individual investors select stocks with volatilities … consistent with the predictions of the hypothesis: the portfolios contain highly similar stocks in terms of volatility, when …

We examine the risk-return characteristics of a rolling portfolio investment strategy where more than six thousand … turnover and low leverage, which may lower systematic risk exposures. To examine this possibility, we launch an easily … constructed ‘low minus high’ (LMH) stock turnover portfolio as a liquidity risk factor. The LMH factor produces significant betas …