power of nested and non-nested models in capturing the stochastic behavior of the risk-free rate. Empirical evidence on …

Inspired by Aumann and Serrano (2008) and Foster and Hart (2009), we propose risk-neutral options' implied measures of … riskiness and investigate their significance in predicting the cross section of expected returns per unit of risk. The empirical … stock returns. Stocks in the lowest riskiness portfolio have economically and statistically higher risk-adjusted returns …

positive link between aggregate riskiness and market risk premium remains intact after controlling for the S&P500 index option … characterized by high aggregate risk aversion and high expected returns …

-varying riskiness and expected market returns. The significantly positive link between aggregate riskiness and market risk premium … showing that aggregate riskiness is higher during economic downturns characterized by high aggregate risk aversion and high …

and uncertainty in the exercise of these options. UNC is also associated with information risk, firm inflexibility, and … generates 13% annual risk-adjusted return. UNC premium is driven by outperformance of high-UNC (inflexible) firms facing higher … information risk and is not explained by established risk factors and firm characteristics …

fairly priced stocks. Thus, our results support the mispricing and arbitrage risk hypotheses that the positive (negative …