associated with average returns. We show that the resulting portfolios are likely to capture not only the priced risk associated … with the characteristic, but also unpriced risk. We develop a procedure to remove this unpriced risk using covariance …

average risk tolerance across investors. The same constant applies to every real foreign investment held by every investor … market risk premia, an average of world market volatilities, and an average of exchange rate volatilities, where we take the … exchange risk approaches zero, the constant will be equal to one minus the ratio of the variance of the world market return to …

a simple extension of the long-run risk model … risks. Portfolios hedging macro uncertainty have historically earned zero or even significantly positive returns, while …

producers' hedging demand (speculators' risk-capacity) increase hedging costs via price-pressure on futures, reduce producers … speculators are capital constrained, and commodity producers have hedging demands for commodity futures. Increases (decreases) in …' inventory holdings, and thus spot prices. Consistent with our model, producers' default risk forecasts futures returns, spot …

We study the implications of hedging for firm financing and investment. We do so using an extensive, hand …-collected dataset on corporate hedging activities. Hedging can lower the odds of negative firm realizations, reducing the expected costs … channels (cost of borrowing and investment restrictions) through which hedging affects corporate outcomes. The analysis we …

The Global Financial Crisis initiated a period of market turbulence and increased counterparty risk for financial … to the pre-crisis period. This shift may be the result of a perceived increase in counterparty risk among banks, as well …

also find that long-short positions in equities play a dominant role in the effective hedging of inflation risk over … hedging approach can eliminate nearly 90 percent of the tracking error of more conventional inflation hedging strategies. We …

common practice of categorically classifying trading by hedgers as hedging while trading by speculators as speculation, as …

This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for … commodity-exporting countries. We show that the introduction of hedging instruments such as futures and options enhances …

hedging non-dollar borrowing rates. These results have implications for the practice of hedging non-dollar interest rate risk … measure its hedging effectiveness. This synthetic Eurocurrency interest rate futures contract is obtained by combining …