We show that firms' idiosyncratic volatility obeys a strong factor structure and that shocks to the common factor in … idiosyncratic volatility (CIV) are priced. Stocks in the lowest CIV-beta quintile earn average returns 5.4% per year higher than … heterogeneous-agent model. In the model, CIV is a priced state variable because an increase in idiosyncratic firm volatility raises …

We explore the equilibrium relation between price volatility and price informativeness in financial markets, with the … volatility. We identify two different channels (noise reduction and equilibrium learning) through which changes in price … informativeness are associated with changes in price volatility. We show that when informativeness is sufficiently high (low …

We explore the implications of asset price volatility for the management of monetary policy. We show that it is …

Many ways exist to measure and model financial asset volatility. In principle, as the frequency of the data increases …, the quality of forecasts should improve. Yet, there is no consensus about a true' or best' measure of volatility. In this … paper we propose to jointly consider absolute daily returns, daily high-low range and daily realized volatility to develop a …

This essay examines what volatility tests tell us about the data and what implications we should derive from them. It … argues that volatility tests do not tell us that "prices are too volatile", implying that "markets are inefficient", but … argues that the discount rate residuals documented by volatility tests (and equivalent return forecasting regressions or …

asset prices, a substantial term premium for long bonds and bursts of conditional volatility in rates of return …

relation has roots in fundamentals as higher market risk predicts greater idiosyncratic earnings volatility and as firm …