We introduce a new meaure of risk appetite in financial markets, based on the cross sectional behavior of excess … returns. Turning them into probabilities through a Markov Switching model, we define one global risk appetite measure as the … cross-sectional average of the individual probabilities for each asset to be in a "risk appetite" regime. Given the …

We merge the literature on downside return risk and liquidity risk and introduce the concept of extreme downside … same time when the market liquidity (return) is lowest. This effect is not driven by linear or downside liquidity risk or … extreme downside return risk and is mainly driven by more recent years. There is no premium for stocks whose liquidity is …

-asset classes and factors and test the long-term performance of U.S. and Global 60/40, Diversified Multi-Asset, Risk Parity … measured risk-adjusted returns in the long run, the Dynamic Asset Allocation reduces the abandonment risk due to its lower … expected drawdown. Across all strategies, risk-tolerant investors that rely on the longer history for setting their …

In this paper, I develop a model in which risk-averse investors possess private information regarding both a stock …'s expected payoff and its risk. These investors trade in the stock and a derivative whose payoff is driven by the stock's risk …. In equilibrium, the derivative is used to speculate on the stock's risk and to hedge against adverse fluctuations in the …

idiosyncratic coskewness betas are positive (negative). Standard risk factors, such as the market, size, book-to-market, and …