This paper examines the intertemporal relation between risk and return for the aggregate stock market using high-frequency data. We use daily realized, GARCH, implied, and range-based volatility estimators to determine the existence and significance of a risk-return tradeoff for several stock...

This paper investigates the role of high-order moments in the estimation of conditional value at risk (VaR). We use the skewed generalized t distribution (SGT) with time-varying parameters to provide an accurate characterization of the tails of the standardized return distribution. We allow the...

This paper introduces a model-independent measure of aggregate idiosyncratic risk based on the mean-variance portfolio theory and the concept of gain from portfolio diversification. With the new approach, there is no need to estimate the covariance terms or the industry-level or firm-level beta...

Using two large hedge fund databases, this paper empirically tests the presence and significance of a cross-sectional relation between hedge fund returns and value at risk (VaR). The univariate and bivariate portfolio-level analyses as well as the fund-level regression results indicate a...

The WRDS Corporate Bond Database, introduced in April 2017, offers a clean and publicly accessible dataset for corporate bond research. In this article, we construct and replicate the Bai, Bali, and Wen (2019, BBW) factors using the WRDS bond returns with the SAS codes in the appendix. Using the...

The literature has so far focused on the risk-return tradeoff in equity markets and ignored alternative risky assets. This paper is the first to examine the presence and significance of an intertemporal relation between expected return and risk in the foreign exchange market. The paper provides...

Drawing upon more than 12 million observations over the period from 1996 to 2020, we find that allowing for nonlinearities significantly increases the out-of-sample performance of option and stock characteristics in predicting future option returns. Besides statistical significance, the...

Motivated by existing evidence of a preference among investors for assets with lottery-like payoffs and that many investors are poorly diversified, we investigate the significance of extreme positive returns in the cross-sectional pricing of stocks. Portfolio-level analyses and firm-level...

This paper presents a study of extreme interest rate movements in the U.S. Federal Funds market over almost a half century of daily observations from the mid 1950s through the end of 2000. We analyze the fluctuations of the maximal and minimal changes in short term interest rates and test the...

Strengthening competition in the equity markets has long been a major public policy objective. This paper turns to another important determinant of market quality, one that has received relatively little attention in the public policy debates: order integration — the way in which orders are...