We study the cross-section of stock option returns by sorting stocks on the difference between historical realized volatility and at-the-money implied volatility. We find that a zero-cost trading strategy that is long (short) in the portfolio with a large positive (negative) difference between...

The market for auction rate securities (ARS) made headlines during the second week of February 2008 when auctions at which the bonds' interest rates reset experienced a wave of "failures." Contrary to headlines that attribute the failures to a "frozen" market or investors' "irrationality," we...