We show that the pricing of idiosyncratic volatility (IV) is due to unaccounted systematic risk, which affects a large number of asset pricing anomalies. A single common IV component explains one third of variation in IV. Mispricing arises when sorting stocks by the part of IV predicted by...

This study explores a number of alternative explanations for the relation between credit spreads and governance. These include the overinvestment story in Li (2007), the information quality story of Duffie and Lando (2001) and an information asymmetry hypothesis based on the findings in Ferreira...

We analyze the volatility risk premium by applying a modified two-pass Fama-MacBeth procedure to the returns of a large cross section of the returns of options on individual equities. Our results provide strong evidence of a volatility risk premium that is increasing in the level of overall...

Recent empirical work suggests that a proxy for the probability of informed trading (PIN) is an important determinant of the cross-section of average returns. This paper examines whether PIN is priced because of information asymmetry or because of other liquidity effects that are unrelated to...

This paper argues that liquidity events in short selling, such as short squeezes, margin calls, and stock specialness, may be an important part of short-selling constraints. We gauge the importance of liquidity events by utilizing a market-based measure, which is the cost of using options to...

We conduct an analysis of the risk and return characteristics of a number of widely used amp;#64257;xed income arbitrage strategies. We amp;#64257;nd that the strategies requiring more quot;intellectual capitalquot; to implement tend to produce signiamp;#64257;cant alphas after controlling for bond and equity...