This paper examines the intertemporal relation between expected return and risk for 30 stocks in the Dow Jones Industrial Average. The mean-reverting dynamic conditional correlation model of Engle (2002) is used to estimate a stock's conditional covariance with the market and test whether the...

We examine the relation between expected future volatility (options' implied volatility) and the cross-section of expected returns. A trading strategy buying stocks in the highest implied volatility quintile and shorting stocks in the lowest implied volatility quintile generates insignificant...

This paper presents a comprehensive study of continuous time GARCH modeling with the thin-tailed normal and the fat-tailed Student-t and generalized error distributions. The paper measures the degree of mean reversion in stock return volatility based on the relationship between discrete time...

This paper examines the returns to investment strategies based on the interactions between value-to-market indicators and corporate financing transactions that increase or decrease the firm's outstanding equity, i.e., equity issues and repurchases. Portfolio-level analyses and firm-level...

This paper examines the intertemporal relation between risk and return for the aggregate stock market using high-frequency data. We use daily realized, GARCH, implied, and range-based volatility estimators to determine the existence and significance of a risk-return tradeoff for several stock...

This paper investigates the role of high-order moments in the estimation of conditional value at risk (VaR). We use the skewed generalized t distribution (SGT) with time-varying parameters to provide an accurate characterization of the tails of the standardized return distribution. We allow the...

Due to the near unit-root behavior of interest rates, the movements of individual interest-rate series are inherently difficult to forecast. In this paper, we propose an innovative way of applying dynamic term structure models to forecast interest-rate movements. Instead of directly forecasting...

This paper examines the cross-sectional relation between idiosyncratic volatility and expected stock returns. The results indicate that (i) data frequency used to estimate idiosyncratic volatility, (ii) weighting scheme used to compute average portfolio returns, (iii) breakpoints utilized to...

This paper provides a comprehensive analysis of the short-term interest-rate dynamics based on three different data sets and two flexible parametric specifications. The significance of nonlinearity in the short-rate drift declines with increasing maturity for the interest-rate series used in the...

This paper introduces a model-independent measure of aggregate idiosyncratic risk based on the mean-variance portfolio theory and the concept of gain from portfolio diversification. With the new approach, there is no need to estimate the covariance terms or the industry-level or firm-level beta...