We use macroeconomic characteristics and exposures to Carry and Dollar as instruments to estimate a latent factor model with time-varying betas with the instrumented principal components analysis (IPCA) method by Kelly et al. (2020). On a pure out-of-sample basis, this model can explain up to...

We show that the level of interest rates determines the magnitude of mispricing at the turn of the tax year, as investors face the trade-off between selling a temporarily-depressed stock this year and selling next year, but delaying tax implications by one year. Interest rates do explain the...

We study the effect of a huge sports sentiment shock, unrelated to economic conditions or government actions, on stock market outcomes. After Brazil's 7-1 humiliating defeat to Germany in the 2014 World Cup, which is likely to be one of the largest sports sentiment shocks ever, the stock market...

We show that the pre-FOMC announcement drift in equity returns occurs mostly in periods of high market uncertainty or risk premium. Specifically, this abnormal return is explained by a significant reduction in the risk premium (implied volatility and variance risk premium) prior to the...

We propose a new set of tradable aggregate risk factors that help us understand the cross-section of stock returns. We argue that the true stochastic discount factor is a combination of aggregate return factors that drive equity market returns. Hence, we consider new factors using data such as...

We propose a model to forecast very large realized covariance matrices of returns, applying it to the constituents of the S&P 500 on a daily basis. To address the curse of dimensionality, we decompose the return covariance matrix using standard firm-level factors (e.g., size, value and...

A measure of the propensity to gamble in casinos constructed without any asset price data provides relevant information for asset pricing. This measure of risk appetite improves the fit of conditional asset pricing models such as the conditional CAPM, explains cross-sectional differences in...

A measure of the propensity to gamble in casinos constructed without any asset price data provides relevant information for asset pricing. This measure of risk appetite improves the fit of conditional asset pricing models such as the conditional CAPM, explains crosssectional differences in...

We show that the level of interest rates determines the magnitude of mispricing at the turn of the tax year, as investors face the trade-o¤ between selling a temporarily depressed stock this year and selling next year, but delaying tax implications by one year. Interest rates do explain the...