We analyze an environment where the uncertainty in the equity market return and its volatility are both stochastic and … conditional equity premium and risk-free rate in equilibrium. Our empirical analysis shows that the equity premium appears to be … earned for facing uncertainty, especially high uncertainty that is disconnected from lower volatility, rather than for facing …

We test the existence of a time-series relationship between the aggregate idiosyncratic volatility and the market index … return at the global level by introducing various global measures of aggregate idiosyncratic volatility. We offer four … definitions of aggregate global idiosyncratic volatility (GIVOL) based on factor models and two other definitions, which are free …

One of the main explanations for the idiosyncratic volatility (IVOL) puzzle (i.e., the negative relation between lagged … IVOL and returns) is a missing risk factor. We show analytically that if IVOL proxies for a missing risk factor, then the … risk factors. Overall, our results suggest that both diversifiable (i.e., true idiosyncratic risk) and non …

Due to arbitrage risk asymmetries, the relationship between idiosyncratic risk and expected returns is positive …) legs of the anomaly portfolios with the highest idiosyncratic volatility produces monthly abnormal returns ranging from 0 … of idiosyncratic risk from the alternative models and throughout different periods …

) The Volatility Puzzle. We offer resolutions of those objections within the rational finance. We do not claim that those …

This paper decomposes the risk premia of individual stocks into contributions from systematic and idiosyncratic risks … 80% of the equity and variance risk premia, respectively. I provide a categorization of sectors based on the risk profile …

VIX and the equity premium. We reexamine this risk-return issue in a multi-risk framework with VIX and T-bond risk (MOVE …

empirical evidence is consistent with investors’ attitudes toward uncertainty and risk, firms’ fundamentals and leverage effects …

substantially increases the return volatility of long-lived assets. Moreover, otherwise identical assets with different degrees of …

We formulate a stylized model that admits volatility ambiguity to the Lucas framework. The model specifies an … economically motivated ambiguity penalty function that makes volatility ambiguity quantifiable with χ2-statistics, and allows for … analytical solutions. The addition of volatility ambiguity greatly expands the range of possible equilibrium outcomes of the …