This paper examines the equilibrium relation between future labor income growth and expected asset returns; it proposes revisions in the expectation of future labor income growth as a macroeconomic state variable and suggests a three-factor model, including a factor related to this variable,...

This study reexamines the determinants of volatility spreads and suggests a new forecast of future volatilities. Contrary to earlier volatility forecasts, the newly introduced forecast is applicable when investors are not risk-neutral or when underlying returns do not follow a Gaussian...

This study investigates the relationship between the return on a stock index and its volatility using high frequency data. Two well-known hypotheses are reexamined: the leverage effect and the volatility feedback effect hypotheses. In an analysis of the five-minute data from the Samp;P500 index,...

We examine whether time-variation in the profitability of momentum strategies is related to variation in macroeconomic conditions. We find reliable evidence that the momentum strategy exposes investors to greater downside risk. Momentum strategies deliver economically large and statistically...

We examine whether ambiguity is priced in the cross-section of expected stock returns. Using the cross-sectional dispersion in real-time forecasts of real GDP growth as a measure for ambiguity, we find that high ambiguity beta stocks earn lower future returns relative to low ambiguity beta...

We show that standard beta pricing models quantify an asset's systematic risk as a weighted combination of a number of different timescale betas. Given this, we develop a wavelet-based framework that examines the cross-sectional pricing implications of isolating these timescale betas. An...

The existence of a “smart money” effect has been debated since Gruber (1996) and Zheng (1999) suggested investors select mutual funds that subsequently perform well. Using hand-collected data on monthly inflows and outflows, we examine the relation between fund flows and subsequent fund...

We investigate whether the business cycle is an important determinant of credit default swap (CDS) spreads and estimate the expected market risk premium as a proxy for the business cycle. Through portfolio regression, we find that structural model variables, including the business cycle, explain...

We develop a conditional version of the consumption capital asset pricing model (CCAPM) using the conditioning variable from the cointegrating relation among macroeconomic variables (dividend yield, term spread, default spread, and short-term interest rate). Our conditioning variable has a...