We develop an econometric methodology to infer the path of risk premia from large unbalancedpanel of individual stock returns. We estimate the time-varying risk premia implied by conditional linearasset pricing models where the conditioning includes instruments common to all assets and asset...

The paper is the first one outside the high-frequency domain to use sentiment-signednews to directly compare news and no-news stock returns. This is done by estimatingwhether returns on positive, neutral and negative news days are significantly differentfrom the average daily return for a large...

We explore the effects of information propagation in a centralized financialmarket. Specifically, we embed search frictions within the Grossman andStiglitz (1980) framework, relying on information percolation as modeled inDuffie, Malamud, and Manso (2009). First, we show that information...

We explore the pricing of variance risk by decomposing stocks' total variance into systematicand idiosyncratic return variances. While systematic variance risk exhibits a negative priceof risk, common shocks to the variances of idiosyncratic returns carry a large positive riskpremium. This...

We investigate whether a bank’s performance during the 1998 crisis, which was viewed at the timeas the most dramatic crisis since the Great Depression, predicts its performance during the recentfinancial crisis. One hypothesis is that a bank that has an especially poor experience in a...

Pairwise stock correlations increase by 27% on average when stock returns arenegative. It is trading activity in small stocks that leads to higher correlationswhen returns are negative. We provide evidence consistent with the hypothesisthat co-ordinated selling by retail investors drives this...

Many postulated relations in finance imply that expected asset returns should monotonicallyincrease in a certain characteristic. To examine the validity of such a claim, onetypically considers a finite number of return categories, ordered according to the underlyingcharacteristic. A standard...