This paper considers liquidity as an explanation for the positive association between expected idiosyncratic volatility … (IV) and expected stock returns. Liquidity costs may affect the stock returns, through bid-ask bounce and other … that this premium is driven by liquidity in the prior month after correcting returns for microstructure noise. The pricing …

This study examines the relative importance of liquidity risk for the time-series and cross-section of stock returns in … test of the Amihud (2002) measure and parametric and non-parametric methods to investigate whether liquidity risk is priced … yield a small distance error, other non-liquidity based models fail to yield economically plausible distance values. Our …

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. This effect is not driven by linear or downside liquidity risk or …

realistic dynamics of riskneutral and realized volatilities. I provide evidence that the jump risk in volatility of long run … of the VIX or realized stock volatility. In contrast, a jump-in-volatility LRR model generates a smaller variance risk … premium but better fits the VIX and the realized stock volatility dynamics. Finally, jump-in-volatility models generate …

We examine long memory volatility in the cross-section of stock returns. We show that long memory volatility is … capitalization, book-to-market ratio, prior performance, and price jumps. Long memory volatility is negatively priced in the cross …-section. Buying stocks with shorter memory and selling stocks with longer memory in volatility generates significant excess returns of …

How important are volatility fluctuations for asset prices and the macroeconomy? We find that a rise in macroeconomic … volatility is associated with a rise in discount rates and a decline in consumption. To study the impact of volatility we provide … a framework in which cashflow, discount-rate, and volatility risks determine risk premia. We show that volatility plays …

volatility of the price--dividend ratio, the predictability of cash flows and returns, and the large predictability of returns in …