In almost every area of empirical finance, researchers are confronted with multiple tests. One high profile example is the identification of investment managers that outperform. Many beat their benchmarks purely by luck. Multiple testing methods are designed to control for luck. Factor selection...

We show that much of the profitability in equity option return strategies, which try to capture option mispricing by taking exposure to underlying volatility, can be explained by an IPCA model. The alpha reduction, relative to competing static factor models, is between 50% and 75% depending on...

We show that much of the profitability in equity option return strategies, that try to capture option mis-pricing by taking exposure to underlying volatility, can be explained by an IPCA model. The alpha reduction, relative to competing static factor models, is between 50% and 75% depending on...

The market for auction rate securities (ARS) made headlines during the second week of February 2008 when auctions at which the bonds' interest rates reset experienced a wave of "failures." Contrary to headlines that attribute the failures to a "frozen" market or investors' "irrationality," we...

We study the cross-section of stock option returns by sorting stocks on the difference between historical realized volatility and at-the-money implied volatility. We find that a zero-cost trading strategy that is long (short) in the portfolio with a large positive (negative) difference between...

We provide evidence that trading frictions have an economically important impact on the execution and the profitability of option strategies that involve writing out-of-the-money put options. Margin requirements, in particular, limit the notional amount of capital that can be invested in the...

Does the ability of suppliers of corporate debt capital to hedge risk through credit default swap (CDS) contracts impact firms' capital structures? We find that firms with traded CDS contracts on their debt are able to maintain higher leverage ratios and longer debt maturities. This is...

The auction rate bond market grew from inauspicious beginnings in 1985 to representing a significant fraction of the municipal bond market in 2007 with a total of 603 issuances that year raising more than $35 billion in capital. Since March of 2008 not a single auction rate bond has been issued....

We investigate the risk and return of a wide variety of trading strategies involving options on the S&P 500. We consider naked and covered positions, straddles, strangles, and calendar spreads, with different maturities and levels of moneyness. Overall, we ï¬nd that strategies involving short...