We investigate the joint hypothesis that a) tax expense contains information about core profitability that is incremental to reported earnings and b) that information is reflected in stock prices with a delay. We find that seasonally-differenced quarterly tax expense, our proxy for tax expense...

Using the risk-neutral volatility and skewness computed from options on the S&P500, we show there is an asymmetric contemporaneous relation between stock returns and changes in implied market volatility and skewness. Changes in expected market volatility and skewness are cross-sectionally priced...

High-frequency trading has become a dominant force in the U.S. capital market, accounting for over 70% of dollar trading volume. This study examines the implication of high-frequency trading for stock price volatility and price discovery. I find that high-frequency trading is positively...

Modern Finance has dominated the area of financial economics for at least four decades. Based on a set of strong but highly unrealistic assumptions its advocates have produced a range of very influential theories and models. Nonetheless, in the last two decades a new academic school of thought...

Trillions of dollars are invested through index funds, exchange-traded funds, and other index derivatives. The benefits of index-linked investing are well-known, but the possible broader economic consequences are unstudied. I review research which suggests that index-linked investing is...

We analyze the history of the equity risk premium from surveys of U.S. Chief Financial Officers (CFOs) conducted every quarter from June 2000 to June 2010. The risk premium is the expected 10-year S&P 500 return relative to a 10-year U.S. Treasury bond yield. While the risk premium sharply...

After posting good performance and impressive business growth for over two decades, quantitative equity investment managers have recently produced weak returns. We develop a measure of risk and show how changes in risk provide a common framework to explain past under-performance, as well as...

At the end of 2009, countries in the Eurozone began to experience a sudden divergence of bond yields as the market perception of sovereign default risk increased. The theory of complete markets suggests that sovereign debt spreads and credit default swap (CDS) premia should track each other very...

This paper examines if firms with the most racially diverse employees enjoy superior benefits and performance above the market average. The problem of the study is to analyze risk premiums and risk-adjusted excess returns of a portfolio of firms with most diverse employees in the United States...