We propose a novel measure of investment plans, namely, expected investment growth (EIG) and find stocks with high EIG outperform stocks with low EIG by 17% per annum. This premium can be generated in a neoclassical model with the investment plan friction, in which a firm's expected returns...

This paper proposes a time series decomposition of book-to-market ratio (BM) into a trend component and an innovation component (I_BM). Under the framework of stock valuation with growth options, we demonstrate that I_BM is negatively related to the change of growth options and therefore...

To understand macroeconomic risks underlying currency carry trades, I propose exploiting rich source of information from analysts’ economic growth forecasts. Specifically, I obtain measures of global growth prospects from the cross-analyst distribution of real GDP growth forecasts. I find that...

We construct risk-neutral return probability distributions from S&P 500 options data over the decade 2003 to 2013, separable into pre-crisis, crisis and post-crisis regimes. The pre-crisis period is characterized by increasing realized and, especially, option-implied returns. This translates...

We identify a global risk factor in the cross-section of implied volatility returns in currency markets. A zero-cost strategy that buys forward volatility agreements with downward sloping implied volatility curves and sells those with upward slopes - volatility carry strategy - generates...

We merge the literature on downside return risk and liquidity risk and introduce the concept of extreme downside liquidity (EDL) risks. The cross-section of stock returns reflects a premium if a stock's return (liquidity) is lowest at the same time when the market liquidity (return) is lowest....

High (low) quality stocks generate anomalously high (low) returns above and beyond expected returns based on betas, market sizes, valuations, and momentum. We provide a comprehensive overview of commonly used quality definitions and test their predictive power for stock returns. We show that...