We study the liquidity exposures of value and growth stocks over business cycles. In worst times, value stocks have higher liquidity betas than in best times, while the opposite holds for growth stocks. Small value stocks have higher liquidity exposures than small growth stocks in worst times,...

We find strong empirical support for the risk-shifting mechanism to account for the puzzling negative relation between idiosyncratic volatility and future stock returns. First, equity holders take on investments with high idiosyncratic risk when their firms are in distress and receive less...

We show that 71% of the earnings announcement premium takes place before, rather than after, earning releases. We attribute this pattern to uncertainty resolution before earnings announcement, and provide compelling evidence that high uncertainty stocks experience more uncertainty resolution and...

Straddles on individual stocks generally earn significantly negative returns. However, average at the money straddles from three days before an earnings announcement to the announcement date yield a highly significant 3.34% return. The positive returns on straddles indicate that investors...

Hedge fund managers' risk-taking choices are determined by their compensation structure. Most existing studies focus on how the incentive fee and the high-water mark provision affect managers' risk-taking. We build a simple model to show that managers' risk-taking is negatively related to their...