By choosing investment strategies that intentionally create exposure to factor betas, investors may be obtaining uncompensated risks. We show across a wide variety of factors and geographical markets that factors constructed from fundamental characteristics have earned high returns, whereas...

The first Global Climate Strike on March 15, 2019 has represented a historical turn in climate activism. We investigate the cross-section of European stock price reactions to this event. Looking at a large sample of European firms, we find that the unanticipated success of this event caused a...

This paper demonstrates that risk-based and behavioral cross-sectional asset pricing anomalies can plausibly coexist. To this end, I build a model in which risk-based value premium exists along with behavioral momentum. The value premium stems from differential exposures of stocks to rare...

We propose a new, price-based measure of information risk called abnormal idiosyncratic volatility (AIV) that captures information asymmetry faced by uninformed investors. AIV is the idiosyncratic volatility prior to information events in excess of normal levels. Using earnings announcements as...

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...

Keyword-based measures purporting to reflect investor sentiment, attention or uncertainty have been increasingly used to model stock market behaviour. We investigate and shed light on the narrative reflected by Google search trends (GST) by constructing a neutral and general stock market-related...

This study investigates the impact of return extrapolation on risk-return trade-offs in both the aggregate time series and the cross section of stocks. We find that the relation between the market’s expected return and expected variance is positive during periods with a low degree of...

In this paper, we propose a cross-sectional option momentum strategy that is based on the risk component of delta-hedged option returns. We find strong evidence of risk continuation in option returns. Specifically, options with a high risk component significantly outperform those with a low risk...

We examine the short-duration premium using pre-scheduled economic, monetary policy, and earnings announcements. We provide high-frequency evidence that duration premia associated with revisions of economic growth and interest rate expectations are consistent with asset pricing models but cannot...

We provide empirical evidence for the incomplete information model advanced by Merton (1987), which shows that the relation between idiosyncratic volatility (IV) and expected return is conditional on the firm's investor base. Using four different proxies for investor base, we show that...