We present a novel predictor for the Dollar factor: variance risk premia imbalances (VPI), defined as the difference in variance risk premium in the U.S. and non-U.S. countries. We argue that VPI theoretically proxies the difference in volatility between U.S. and non-U.S. stochastic discount...

This paper aims to explore whether text-based sentiment can perform well at predicting bond returns. We propose a sentiment trend factor based on the bond fear index that is a powerful predictor for future bond risk premia in- and out-of-sample. Notably, the text-based fear trend factor...

We analyze the risk-return trade-off for international (France, Germany, Netherlands, Spain, UK, and US) government bond markets and the US stock market. We measure risk by the higher order moments (volatility, skewness, and excess kurtosis) as they are defined in Savva and Theodossiou (2018)....

I empirically show that uniform-price U.S. Treasury auctions are underpriced relative to the secondary market settlement date price, and that this underpricing is explained by risk premia. I posit that intermediaries demand a risk premium to offset future secondary market price uncertainty, in...

To support Chinese low-carbon transition and green growth, Chinese carbon-neutral bonds have been issued since February 2021. Our investigation of the carbon-neutral bond issuance by Chinese firms from inception to August 2022 shows that these initial carbon-neutral bonds had significantly lower...

This study examines the impact of macroeconomic announcements on the risk premium and its sources under time-varying preference. We propose a novel method to decompose risk premium changes into the risk and preference components, which are estimated from option prices immediately before and...

The ESG (Environmental, Social, and Governance) concept has been increasingly adopted in financial markets, this paper studies the evolving effect of corporate ESG performance on the stock returns in China’s stock markets. Utilizing the Paris Agreement and China’s President Xi’s pledge to...

We study the asset allocation of an investor with prospect theory (PT) preferences. First, we solveanalytically the two-asset problem of the PT investor for one risk-free and one risky asset and find thatloss aversion and the reference return affect differently less ambitious and more ambitious...

We combine high-frequency stock returns with risk-neutralization to extract the daily common component of tail risks perceived by investors in the cross-section of firms. We find that our tail risk measure significantly predicts the equity premium, variance risk premium and realized moments of...