We introduce a new approach to measuring riskiness in the equity market. We propose option implied and physical measures of riskiness and investigate their performance in predicting future market returns. The predictive regressions indicate a positive and significant relation between...

We propose options' implied and physical measures of riskiness and investigate their performance in predicting future returns on the U.S. equity market. The predictive regressions indicate a positive and significant relation between time-varying riskiness and expected market returns. The...

In this paper, I show that the variance of Fama-French factors, the variance of the momentum factor, as well as the correlation between these factors, predict an important fraction of the time-series variation in post-1990 aggregate stock market returns. This predictability is particularly...

We derive generalized bounds on conditional expected excess returns. The bounds deliver consistent expected returns for individual and index-type assets, are conditionally tight, account for all risk-neutral moments of returns, and outperform runner-up models for out-of-sample predictions....

Replacing equity return (as in the equity risk premium) with returns on an arbitrary contingent claim, we obtain a new class of economic risk premiums to impose upon candidate models. These risk premiums reflect the distance between the physical and risk-neutral moments for asset returns, can be...

We study the joint dynamics of macroeconomic variables, bond yields, and the exchange rate in an empirical two-country New-Keynesian model complemented with a no-arbitrage term structure model. With Canadian and US data, we are able to study the impact of macroeconomic shocks from both countries...

I use option prices to infer real-time moments of stochastic discount factors (SDFs). The moments are estimated, from daily SP 500 index option data, in real time, without relying on past observations. These moments are forward-looking and significantly predict the market excess return. The...

This paper proposes an approach to study the expected excess return of a long-term bond and focuses on a lower bound. This lower bound is a crucial number, as it represents the minimum expected excess return demanded by investors. The derived bound is model-independent and can be extracted from...

We develop a strategy for utilizing higher moments, variance risk premia, and conditioning information efficiently, and hence improve on the variance bounds computed by Hansen and Jagannathan (1991); Gallant, Hansen, and Tauchen (1990); and Bekaert and Liu (2004). Our bounds reach existing...

Entropy and entropy-like measures of pricing kernel dispersion emerge as useful tools in asset pricing research. We develop a systematic approach to bounding entropy by incorporating conditioning information. Our bounds feature a fixed-point solution to a dynamic asset allocation problem....