investors' learning behavior into an equilibrium stochastic volatility model. In the model, we introduce noise signals as a …-varying volatility for stock returns, even when volatility of economic fundamental is constant. As a source of risk, for investors with … volatility and jump …

future returns. We argue that these firms have negative alphas because they are a hedge against expected aggregate volatility …, and the aggregate volatility risk factor can largely explain the high RSI effect. The key mechanism is that high RSI firms … more valuable as idiosyncratic volatility goes up. Idiosyncratic volatility usually increases with aggregate volatility (i …

law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries … implications of the theory. Time variation in asset ivol causes time variation in the option value of equity that translates into …

volatility risks are not priced in unconditional models, but, consistent with theory, their factor loadings, conditional on VOV …This paper develops a general equilibrium model and provides empirical support that the market volatility-of-volatility … (VOV) predicts market returns and drives the time-varying volatility risk. In asset pricing tests with the market …

market index. The tail loss measure is motivated by the results of the extreme value theory, and it is computed from observed …

volatility and return predictability while preserving the model's consistency with option moments …

conditioning on skewness increases the predictive power of the volatility spread and that coefficient estimates accord with theory … of the volatility spread to skewness. We measure skewness from option prices and test these predictions. We find that … the term structure of option-implied volatility, skewness and kurtosis and find that time-dependence in returns has a …

Stock market volatility clusters in time, appears fractionally integrated, carries a risk premium, and exhibits … asymmetric leverage effects relative to returns. At the same time, the volatility risk premium, defined by the difference between … the risk-neutral and objective expectations of the volatility, is distinctly less persistent and appears short …