A unified explanation of risk and mispricing in stock returns underpinned by their aggregate liquidity risk is presented. We argue alternating liquidity exposures depict two distinct investment preferences-hedging against aggregate liquidity risk or betting on it. A three-factor model capturing...

Economic policy touches most facets of corporate decision-making and variations in policy can elicit significant changes in financial performance and asset prices. We utilise the EPU measure of Baker et al. (2016) to investigate the extent to which policy uncertainty influences Australian...

Political uncertainty drives markets. Among macroeconomic forces, it is one of the fewfactors that systematically affect most assets - hence it qualifies as a state variable in the senseof the ICAPM and should carry a risk premium. We employ static and conditional factormodels using data in...

Purportedly consistent with "risk parity" (RP) asset allocation, recent studies document compelling "low risk" trading strategies that exploit a persistently negative relation between Sharpe ratios (SRs) and maturity along the U.S. Treasury (UST) term structure. This paper extends this evidence...

Companies face significant carbon-transition risk as the global economy works to combat climate change. This paper studies the market-based premium associated with the carbon-transition risk globally and finds that firms with more carbon-intense business models earn higher returns in recent...

We investigate the risk and return relationships of stocks, bonds and T-bills over the past six decades in Canada (1958 to 2017) and provide insights on some conventional folklore on a myriad of risk and return issues including investment duration. We also investigate the impact of NAFTA and the...

This paper provides an overview of sovereign debt portfolio risks and discusses various liability management operations (LMOs) and instruments used by public debt managers to mitigate these risks. Debt management strategies analyzed in the context of helping reach debt portfolio targets and...

This paper investigates whether equity indices of 24 emerging and 28 developed markets compensate their investors equally after taking risk into account, and examines the predictive power of reward-to-risk ratios for expected market returns. We place special emphasis on downside risk by...

This paper offers a novel framework for understanding the equilibrium price of risk. Notably, it illustrates the CAPM fails under its own exact assumptions when the fair price of total risk is not (ex ante) linear. A linear Security Market Line then nevertheless remains, yet consistent with...

This paper finds that a zero-investment strategy that goes long (short) in the highest (lowest) quintiles of firm-specific risk earns overall positive excess returns across twenty-one emerging markets. Interestingly, in previous studies such returns were found to be negative for the US and...