In traditional tests of asset pricing theory Ordinary Least Squares (OLS) regression methods are used in empirical tests of factor models, which implies a focus on the means of the distributions of covariates. The work of Koenker and Basset (1982) and Koenker (2005) provides an alternative via...

We examine how extreme market risks are priced in the cross-section of asset returns at various horizons. Based on the decomposition of covariance between indicator functions capturing fluctuations of different parts of return distributions over various frequencies, we define a \textit{quantile...

We analyze the joint out-of-sample predictive ability of a comprehensive set of 299 firm characteristics for cross-sectional stock returns. We develop a cross-sectional out-of-sample R2 statistic that provides an informative measure of the accuracy of cross-sectional return forecasts in terms of...

This empirical study is conducted to apply the Fama French three-factor model in the Australian context using the most recent daily data for the period of 5 years from July 2009 to May 2015. The focus of this study is on various approaches of portfolio formation adopted in previous empirical...

We discuss the finding that cross-sectional characteristic based models have yielded portfolios with higher excess monthly returns but lower risk than their arbitrage pricing theory counterparts in an analysis of equity returns of stocks listed on the JSE. Under the assumption of general...

Pricing of capital share risks provides a novel link between macroeconomicsand finance. Our paper adopts the Epstein-Zin type utility framework andthe Bansal and Yaron's (2004) long-run risk model to derive an heterogeneousasset pricing model that extends Lettau et al.'s (2019) capital share...

This paper examines the idiosyncratic volatility (IV) puzzle in the Indian stock market for the period 1999–2014. Univariate and bivariate sorting, as well as cross-section regressions, suggest a positive relation between idiosyncratic volatility and future stock returns. However, this...

We present a statistic to generally represent extremes in the distribution of temperature anomalies and demonstrate its consequences on financial markets. The diverse shocks that our measure portrays are established to be primary drivers of electricity consumption and the weather futures market....

Portfolio sorting is ubiquitous in the empirical finance literature, where it has been widely used to identify pricing anomalies in different asset classes. Despite the popularity of portfolio sorting, little attention has been paid to the statistical properties of the procedure or to the...

This paper decomposes the risk premia of individual stocks into contributions from systematic and idiosyncratic risks. I introduce an affine jump-diffusion model, which accounts for both the factor structure of asset returns and that of the variance of idiosyncratic returns. The estimation is...