Stocks with large increases in call implied volatilities over the previous month tend to have high future returns while stocks with large increases in put implied volatilities over the previous month tend to have low future returns. Sorting stocks ranked into decile portfolios by past call...

This paper investigates the role of currency denomination in the the intertemporal risk-return relation among G7 countries. Similar to the findings of previous studies, our estimation also shows that the financial markets of the G7 countries are integrated. We obtain significant pricing...

This paper develops an unconditional and conditional extreme value approach to calculating value at risk (VaR), and shows that the maximum likely loss of financial institutions can be more accurately estimated using the statistical theory of extremes. The new approach is based on the...

The literature has so far focused on the risk-return tradeoff in equity markets and ignored alternative risky assets. This paper is the first to examine the presence and significance of an intertemporal relation between expected return and risk in the foreign exchange market. The paper provides...

While it is established that idiosyncratic volatility has a negative impact on the cross-section of future stock returns, the relationship between idiosyncratic volatility and future hedge fund returns is largely unexplored. We document that hedge funds with high idiosyncratic volatility...

Drawing upon more than 12 million observations over the period from 1996 to 2020, we find that allowing for nonlinearities significantly increases the out-of-sample performance of option and stock characteristics in predicting future option returns. Besides statistical significance, the...

It has become increasingly popular to advise investors to relocate their funds from a primarily stock portfolio to a primarily bond portfolio as they get older. However, the well-known decision rules such as mean-variance or stochastic dominance rules are unable to explain this common practice....

This paper determines whether the world market risk, country-specific total risk, and country-specific idiosyncratic risk are priced in an international capital asset pricing model (ICAPM). Portfolio-level analyses, country-level cross-sectional regressions, stacked time-series, and pooled panel...

This paper presents a study of extreme interest rate movements in the U.S. Federal Funds market over almost a half century of daily observations from the mid 1950s through the end of 2000. We analyze the fluctuations of the maximal and minimal changes in short term interest rates and test the...