We find that investor attention proxies proposed in the literature collectively have a common component that has significant power in predicting stock market risk premium, both in-sample and out-of-sample. This common component is well extracted by using partial least squares, scaled principal...

Recent empirical finance literature reports a sizable equity premium on two types of days. The first is under Democratic administrations. The second is on scheduled macroeconomic news announcement days. The current study unifies the two strands of literature by documenting that statistically...

We find that the FOMC-announcement-day return premium earned by a firm is positively related to the increase in its ex ante, option-implied skewness prior to the announcement. This finding is consistent with: (1) the existence of an announcement-day Fed put that is partially anticipated by the...

This paper examines the risk premium associated with information shocks in equity markets. For all stocks traded on Borsa Istanbul between March 2005 and December 2020, we calculate information shocks as unanticipated information asymmetry by focusing on changes in the proportion of the...

In this paper, we provide an estimate of the ex-ante risk premia on earnings announcements based on the option market. We find that the risk premia are time-varying and have predictive power on future stock returns. With our ex-ante risk premia as a measure of uncertainty before each earnings...

A conditional asset pricing model with risk and uncertainty implies that the time-varying exposures of equity portfolios to the market and uncertainty factors carry positive risk premiums. The empirical results from the size, book-to-market, and industry portfolios as well as individual stocks...

Empirical measures of world consumption growth risk have failed to rationalize the cross-section of country equity returns. We propose a new factor, termed "the global consumption factor", to explain the patterns in risk premiums on international equity markets. We identify this factor as the...

We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...

The simultaneous occurrence of jumps in several stocks can be associated with major financial news, triggers short-term predictability in stock returns, is correlated with sudden spikes of the variance risk premium, and determines a persistent increase (decrease) of stock variances and...