Sectoral labor reallocation shocks change the optimal allocation of workers across industries. We find that a proxy for this type of labor market shocks has very strong and robust predictive power for future stock market returns. In predictive regressions, the one-year out-of-sample R2 is as...

The computation of implied cost of capital (ICC) is constrained by the lack of analyst forecasts for half of all firms. Hou, van Dijk, and Zhang (2012, HVZ) present a cross-sectional model to generate forecasts in order to compute ICC. However, the forecasts from the HVZ model perform worse than...

We uncover new return predictability in the cross-section of delta-hedged equity options. Expected returns of writing delta-hedged calls are negatively correlated with current stock price, firm profit margin and profitability, but positively correlated with firm cash holding, cash flow variance,...