We build a new model integrating a work-horse New Keynesian model with investor risk aversion that moves with the business cycle. We show that the same habit preferences that explain the equity volatility puzzle in quarterly data also naturally explain the large high-frequency stock response to...

We argue the earnings announcement premium is a measure of firm-specific uncertainty aversion. Our stylized model shows earnings announcements, as pure news events, are priced only if investors are uncertainty averse; further, the earnings announcement return is negatively correlated to future...

This study tests and finds that stock prices around earnings announcements reflect investor aversion to negative news. We find that when forecasts are negatively skewed, indicating considerable downside risk, earnings announcement returns are eventually more positive. Announcement returns are...

Using a high-frequency dataset, we analyze the effects of risk-aversion and real-time macroeconomic variables on both conditional variances and stock-bond correlations in the Eurozone. We use a generalized DCCX model for correlations and a GARCHX model for variances in order to separate the...