Stocks with high idiosyncratic volatility perform poorly relative to low idiosyncratic volatility stocks. We offer a novel explanation of this anomaly based on real options, which is consistent with earlier findings on idiosyncratic volatility (the positive contemporaneous relation between...

Investment-based asset pricing research highlights the role of irreversibility as a determinant of firms' risk and expected return. In a neoclassical model of a firm with costly scale adjustment options, we show that the effect of scale flexibility (i.e., contraction and expansion options) is to...

Although managers are interested in the financial value of customers and researchers have pointed out the importance of stock analysts who advise investors, no studies to date have explored the implications of customer satisfaction for analyst stock recommendations. Using a large-scale...

This article seeks to find factors that can account for the determinants of common variations in returns for a small open economy where the Swedish stock market serves as an example. The importance of the candidate factors is first analyzed by looking at the standard deviation of their mimicking...

Guided by a simple model in which hedge fund managers with access to less-profitable investment strategies take more funding risk, I show that funds with a high exposure to market-wide funding shocks - measured by changes in Libor-OIS spreads - subsequently underperform funds with a low exposure...

This paper theoretically investigates the effect of uncertainty about future investment on expected stock returns. Based on a real options framework, we incorporate the learning-by-doing effect to analyze the irreversible investment problem. In our investment decision framework, the timing of...

GVC will affect stock returns and there is a stock return co-movement along GVCs. Meanwhile, the stock return co-movement is formed through two channels. The first channel is the correlation among fundamentals of firms, which will directly affect their stock return. The second is the common risk...