Inspired by Aumann and Serrano (2008) and Foster and Hart (2009), we propose risk-neutral options' implied measures of riskiness and investigate their significance in predicting the cross section of expected returns per unit of risk. The empirical analyses indicate a negative and significant...

We introduce a new approach to measuring riskiness in the equity market. We propose option implied and physical measures of riskiness and investigate their performance in predicting future market returns. The predictive regressions indicate a positive and significant relation between...

We propose options' implied and physical measures of riskiness and investigate their performance in predicting future returns on the U.S. equity market. The predictive regressions indicate a positive and significant relation between time-varying riskiness and expected market returns. The...

Using a measure of ex-ante expected returns based on analyst price targets, we find strong evidence that investors price both systematic (beta and co-skewness) and non-systematic (idiosyncratic volatility) risk when determining the appropriate rate of return on a security. We demonstrate that...

The low (high) abnormal returns of stocks with high (low) beta - the beta anomaly - is one of the most persistent anomalies in empirical asset pricing research. This paper demonstrates that investors' demand for lottery-like stocks is an important driver of the beta anomaly. The beta anomaly is...

Frazzini and Pedersen (2014) document that a betting against beta strategy that takes long positions in low-beta stocks and short positions in high-beta stocks generates a large abnormal return of 6.6% per year and they attribute this phenomenon to funding liquidity risk. We demonstrate that...

Option volatilities have significant predictive power for the cross section of stock returns and vice versa. Stocks with large increases in call implied volatilities tend to rise over the following month whereas increases in put implied volatilities forecast future decreases in next-month stock...

Stocks with large increases in call implied volatilities over the previous month tend to have high future returns while stocks with large increases in put implied volatilities over the previous month tend to have low future returns. Sorting stocks ranked into decile portfolios by past call...