This paper examines the idiosyncratic volatility (IV) puzzle in the Indian stock market for the period 1999–2014. Univariate and bivariate sorting, as well as cross-section regressions, suggest a positive relation between idiosyncratic volatility and future stock returns. However, this...

Equal compensation across assets for the same risk exposures is a bedrock of asset pricing theory and empirics. Yet real-world frictions can violate this equality and create high-Sharpe ratio opportunities. We develop new methods for asset pricing with cross-sectional heterogeneity in...

The paper evaluates the out-of-sample predictive potential of machine learning methods in the cross-section of international equity index returns using firm fundamentals and macroeconomic predictors. The relatively small number of equity indices in the cross-section compared to the multitude of...

This paper investigates the predictability of market betas for crypto assets. The market beta is the optimal weight of a short position in a simple two-asset portfolio hedging the market risk. Investors are therefore keen to forecast the market beta accurately. Estimating the market beta is a...

We present a statistic to generally represent extremes in the distribution of temperature anomalies and demonstrate its consequences on financial markets. The diverse shocks that our measure portrays are established to be primary drivers of electricity consumption and the weather futures market....

Measuring risk in the stock market context is one of the key challenges of modern finance. Despite of the substantial significance of the topic to investors and market regulators, there is a controversy over what risk factors should be used to price the assets or to determine the cost of...

Measuring risk in the stock market context is one of the key challenges of modern finance. Despite the substantial significance of the topic to investors and market regulators, there is a controversy over what risk factors should be used to price assets or to determine the cost of capital. We...

We examine the asymptotic properties of the coefficient of determination, R2, in models with α-stable   random variables. If the regressor and error term share the same index of stability α2, we show that the R2  statistic does not converge to a constant but has a nondegenerate distribution...

This study examines the role of downside higher order co-moments in asset pricing models when stock returns are not normal. We test the effect of higher order downside co-moments using a data set of daily returns of Société des Bourses Françaises 250 Index stocks during the period 1987-2009....