We examine risk-return trade-offs associated with “covlite” deals which lack systematic covenant compliance requirements of traditional “covheavy” deals. We document demand-driven risk taking incentives in the primary markets where covlite deal pricing has become increasingly...

One of the main explanations for the idiosyncratic volatility (IVOL) puzzle (i.e., the negative relation between lagged IVOL and returns) is a missing risk factor. We show analytically that if IVOL proxies for a missing risk factor, then the negative relation between IVOL and returns should...

Two contrasting explanations are offered in the literature for the R&D-to-market anomaly: mispricing of R&D resulting from limited investor attention to R&D spending, and the failure of conventional risk factors to completely capture the risk associated with R&D. Exploiting accounting treatments...

This paper shows that the premium for systematic skewness in individual stocks is positive on average, has negative realized systematic skewness, and is time varying. When skewness preference is high rather than low, the risk premium is 4% higher. Systematic skewness also has significant...

The salience theory perspective on asset prices implies that investors overvalue stocks with salient upsides and undervaluing firms with salient downsides. The resulting mispricing is subsequently reverted, producing a predictable pattern in the cross-section of returns. This study is the first...

Controlling for numerous attributes tied to default and priced asset risk, including yield, credit spread, bond rating, and maturity, we find that a corporate bond’s book value divided by its market price strongly predicts its return. Bonds with the 20% highest “bond book-to-market ratios”...

Controlling for numerous attributes tied to default and priced asset risk, including yield, credit spread, bond rating, and maturity, we find that a corporate bond’s book value divided by its market price strongly predicts its return. Bonds with the 20% highest “bond book-to-market ratios”...

We examine the out-of-sample performance of 240 stock market anomalies enhanced by 49 machine learning algorithms and over 260 individually trained models across an international data sample of nearly 1.9 billion stock-month-anomaly observations from 1980 to 2019. We demonstrate significant...

We show that merger announcement returns account for virtually all of the measured size premium. An empirical proxy for ex ante takeover exposure positively and robustly relates to cross-sectional expected returns. The relation between size and expected returns becomes positive or insignificant,...

In this study, we investigate the pricing of risks in the cross-section of cryptocurrency returns. In doing so, we decompose total variations into systematic and idiosyncratic components, as well as differentiate jumps from diffusive variations. We show that a hedged portfolio sorted on...