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 …

volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent … geometrically. If market makers are sufficiently risk averse, however, the cross-correlation pattern is inverted. Our results are … returns and market microstructure noise, which feature prominently in the recent volatility literature. The cross-correlation …

Current practice largely follows restrictive approaches to market risk measurement, such as historical simulation or … produce more accurate risk assessments, treating both portfolio-level and asset-level analysis. Asset-level analysis is … particularly challenging because the demands of real-world risk management in financial institutions - in particular, real …

International risk-sharing has far-reaching implications both for economic policy and for basic research in economics …. When countries do not share risk, individuals in those countries experience fluctuations in their consumption levels that … are undesirable and possibly unnecessary. This paper extends and refines the study of international risk-sharing in two …

We introduce a new, hybrid measure of stock return tail covariance risk, motivated by the under-diversified portfolio … return as in standard systematic risk measures. We document a positive and significant relation between hybrid tail … covariance risk (H-TCR) and expected stock returns, with an annualized premium of 9%, in contrast to the insignificant or …

exposure to latent risk factors, IPCA will identify the corresponding latent factors. If no such factors exist, IPCA infers … that the characteristic effect is compensation without risk and allocates it to an "anomaly" intercept. Studying returns …

across assets, the model generates large risk premia even for assets with stable fundamentals. Very small assets may comove … endogenously and hence earn positive risk premia even if their fundamentals are independent of the rest of the economy. I provide … its risk premium …

It is widely believed that correlations between international equity markets tend to increase in highly volatile bear … markets. This has led some to doubt the benefits of international diversification. This article solves the dynamic portfolio … the regimes are small for moderate levels of risk aversion, and the intertemporal hedging demands induced by time …

the optimal portfolio without any restrictions on portfolio weights. This shrinkage helps reduce the risk in estimated …

factors does not improve forecast power. Portfolio optimization helps for risk control, but the different covariance models …