The equity term structure is downward sloping at long maturities. I show, through an ICAPM estimation, that the tradeoff between market and reinvestment risk explains this pattern. Intuitively, while long-term dividend claims are highly exposed to market risk, they are also good hedges for...

The debt-to-GDP ratio predicts negatively cumulative nominal consumption growth up to 10-year horizon, which comes from the ratio's ability to forecast both lower real growth and deflation. Moreover, a higher debt-to-GDP ratio is associated with higher yield spreads, controlling for output gap...

Price-based liquidity metrics are better in 2013-2014 for small trades and large high-yield bond trades, but not for large investment grade bond trades, relative to before the crisis, and are better for all bond types and trade sizes relative to 2010-2012. This evidence contrasts with the...

Using a structural model of default, we construct a measure of systemic default defined as the probability that many firms default at the same time. We account for correlations in defaults between firms through exposures to common shocks. The systemic default measure spikes during recession...

We document a strong positive cross-sectional relation between corporate bond yield spreads and bond return volatilities. As corporate bond prices are generally attributable to both credit risk and illiquidity as discussed in Huang and Huang (2012), we apply a decomposition methodology to...

The interplay between investors' demand and providers' incentives has shaped the evolution of exchange-traded funds (ETFs). While early ETFs offered diversification at low cost, later ETFs track niche portfolios and charge high fees. Strikingly, over their first five years, specialized ETFs lose...

Hedge funds significantly reduced their equity holdings during the recent financial crisis. In 2008Q3-Q4, hedge funds sold about 29% of their aggregate portfolio. Redemptions and margin calls were the primary drivers of selloffs. Consistent with forced deleveraging, the selloffs took place in...

Using theories from the behavioral finance literature to predict that investors are attracted to industries with more salient outcomes and that therefore firms in such industries have higher valuations, we find that firms in industries that have high industry-level dispersion of profitability...

Previous studies show that firms with low inventory growth outperform firms with high inventory growth in the cross-section of publicly traded firms. In addition, inventory investment is volatile and procyclical, and inventory-to-sales is persistent and countercyclical. We embed an inventory...

This paper provides evidence that the 52-week high serves as a psychological barrier, inducing expectational errors and underreaction to news. Two clear predictions emerge and are confirmed in the data. First, nearness to a 52-week high induces expectational errors; evidence from earnings...