We develop a measure of how information events impact investors' perceptions of risk that is broadly applicable and simple to implement. We derive this measure from an option-pricing model where investors anticipate an announcement that simultaneously conveys information on the announcer's...

I investigate whether information quality affects the cost of equity capital through liquidity risk. Liquidity risk is the sensitivity of stock returns to unexpected changes in market liquidity; recent asset pricing literature has emphasized the importance of this systematic risk. I find that...

The properties of information, including "information uncertainty", can be understood only Bayesianly. Common formulations that define information uncertainty in terms of just statistical "precision" (i.e. sampling variance), or any one estimator characteristic (e.g. bias), are inadequate for...

We show that option-implied jump tail risk estimated prior to earnings announcements strongly predicts post-earnings risk-adjusted abnormal stock returns. The predictive power of implied jump tail risk is particularly strong on extreme abnormal stock returns whose absolute values exceed 10%. The...

There is a strand of CAPM based analytical research in accounting that uncovers a little known CAPM corollary, namely that the firm's cost of capital is a joint effect of its payoff risk and payoff mean. The CAPM equilibrium mechanism has the effect that the "numerator" (expected payoff) drives...