In this paper, we investigate the dynamic response of stock market volatility to changes in monetary policy. Using a vector autoregressive model, our findings reveal a significant and asymmetric response of stock returns and volatility to monetary policy shocks. Although the increase in the...

Current empirical asset pricing research on idiosyncratic volatility (IVOL), negatively related to cross-sectional expected returns, fails to take explicit account of risk that results from a shock to a network of economically related stocks. These stocks move together, and are therefore...

We investigate entropy as a financial risk measure. Entropy explains the equity premium of securities and portfolios in a simpler way and, at the same time, with higher explanatory power than the beta parameter of the capital asset pricing model. For asset pricing we define the continuous...

We find evidence of antipersistence in returns and dividend growth, while the price-dividend ratio appears to exhibit nonstationary long memory, which seems contradictory in the present-value context. We reconcile these findings by showing that the aggregation of antipersistent expected dividend...

We investigate investor's correlated attention as a determinant of excess stock market comovement. We propose a novel proxy, "co-attention", that measures the correlation in demand for market-wide information across stock markets approximated by the Google Search Volume Index (SVI). Our results...

This paper provides a theoretical explanation for the heteroscedasticity of asset returns. In line with existing empirical results, our model yields an asymmetric relationship between stock return and volatility. Based on the simple assumptions that investors behave according to Prospect Theory...

This paper analyses the effects of oil prices and exchange rates on sectoral stock returns in the BRICS-T countries over the period from 2 January 2001 to 22 March 2021. After estimating a benchmark linear model, the possible presence of structural breaks is investigated using the Bai and Perron...

We reveal a novel channel through which market participants' sentiment influences how they forecast stock returns: their optimism (pessimism) affects the weights they assign to fundamentals. Our analysis yields four main findings. First, if good (bad) “news” about dividends and interest...

It is well known that intraday volatilities and trading volumes exhibit strong seasonal features. These seasonalities are usually modeled using dummy variables or deterministic functions. Here, we propose a test for seasonal long memory with a known frequency. Using this test, we show that...

This paper introduces a new information density indicator to provide a more comprehensive understanding of price reactions to news and, more specifically, to the sources of jumps in financial markets. Our information density indicator, which measures the abnormal amount of noisy “ticker”...