Adding a size-premium to the CAPM is not an uncommon resort in small companies valuations. The objective of the premium is to price-in the small-size risk by increasing the required return on capital and thus reducing the company estimated price. Nevertheless, the use of a premium compromises...

This paper investigates the price formation of credit risk premia across European sovereign countries. A metric of such premia is retrieved under the statistical measure using bootstrap techniques on hedging portfolios. This latter is retrieved in the cash-synthetic market by means of comparison...

It is well documented that the cash flow beta can partly explain the source of the value premium. This paper presents an empirical test that cast doubt on this widely accepted belief. We double sort the stocks with their value and quality dimension and obtain four corner portfolios: (A)...

We analyze the US Corporate Investment Grade (IG) credit risk premium, as represented by the average excess return of US corporate IG bonds over duration-matched US Treasuries. Over the period January 1973 through April 2018, this credit excess return averaged 60 bps p.a. (implying a stand-alone...

A large set of macroeconomic variables have been suggested as equity risk premium predictors in the literature. This paper proposes a forecasting approach for the equity risk premium with two novel features. First, individual month-ahead forecasts are obtained from parsimonious threshold...

There is widespread agreement that corporate debts' recovery rates are time-varying, but empirical work in this area is limited. We show that the joint information from the term structure of senior and subordinate credit default swaps can identify the level and the dynamics of recovery rates. We...

This paper builds a real-options model of the firm with stochastic volatility to shed new light on the value premium, financial distress, and credit spread puzzles. Since the equity of growth firms and financially distressed firms have embedded options, such securities hedge against volatility...

What are the macroeconomic forces behind the cross-sectional and time-series variation in expected excess equity returns? To answer this question, my paper integrates models of empirical asset pricing with structural vector autoregressions (VAR). I construct two orthogonalised shocks in a VAR...

I analyze the risk of nominal assets within an external habit model supplemented with realistic non-Gaussian macroeconomic dynamics. The estimation identifies time-varying "demand-like" and "supply-like" macroeconomic shocks directly linked to the risk of nominal assets. After matching standard...

It is an unfortunate, yet unmistakable fact that human life can sometimes be unusually painful: loss of loved ones, divorce, critical medical issues just to name a few. I introduce the notion of 'dis-utility shocks': rare but large negative deviations from consumption-based utility level, to...