This paper introduces seasonality into a model of expected stock returns. We confirm previous findings that there is no evidence for cross-sectional variation in expected stock returns when we restrict the means to be constant throughout the year. Yet, we show there is substantial variation when...

This paper documents a periodic structure of average returns to portfolio strategies that buy stocks with high historical returns and sell stocks with low historical returns. Previous research by DeBondt and Thaler (1985, 1987) used cumulative monthly returns to show historical winners earn...

This paper presents new option pricing formulas that generalize the Black-Scholes [1973] model by incorporating an extra skewness parameter. These formulas are derived in pricing models where one cannot price options by replicating their payoffs with stock and bond portfolios. Instead there is a...

This paper studies the performance of international stock strategies based on historical returns. Stocks that outperform the local market in a particular month continue to outperform the local market in futures years in that same calendar month. This effect lasts for 10 years and in addition to...

This paper studies the performance of international stock strategies based on historical returns. Stocks that outperform the local market in a particular month continue to outperform the local market in future years in that same calendar month. This effect lasts for 10 years and the same pattern...

This paper shows a relationship between bond pricing models and option pricing models with stochastic volatility. It exploits this relationship to find a new stochastic volatility model with a closed-form solution for European option prices. The model allows nonzero correlation between...

This paper explores the effect of extreme events or big jumps downwards and upwards on the jump-diffusion option pricing model of Merton (1976). It starts by obtaining a special case of the jump-diffusion model where there is a positive probability of a big jump downwards. Then, it obtains a new...

This paper examines the ability of beta and size to explain cross-sectional variation in average returns in twelve European countries. We find that average stock returns are positively related to beta and negatively related to firm size. The beta premium is in part due to the fact that high beta...

This paper develops a new method to calculate hedged returns on model-free “equity VIX” option portfolios. Our returns are highly correlated with realized variance minus implied variance. Compared to CBOE’s VIX formula, our formulas are more accurate for both simulated and actual prices,...

This paper explores the variance risk premium in option returns across twenty different futures, including equities, bonds, currencies, and commodities (energy, metals, and grains). We implement a novel model-free methodology that constructs tradable option portfolios, which replicate realized...