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We examine the connection between tail risk — as measured in Kelly and Jiang (2014) — and the cross-section of expected returns. In conditional predictive regression systems and vector-autoregressions of the market portfolio and the long- and shoresides of the Fama-French factor portfolios,...
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disaster area. We find robust evidence that banks charge significantly higher loan spreads for firms located in the … neighborhood of the disaster area than for remote firms. The results are not driven by regional spillovers, limited credit supply … their clients’ natural disaster risk …
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dollars, on average, during the first year following the disaster. Environmental crises are associated with smaller effects …
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less resilient ones, reflecting their lower exposure to disaster risk. Hence, going forward, markets appear to price …
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