Persistence of ex-ante volatility and the cross-section of stock returns

The Cross - Section of Stock Returns :

Earnings Shocks and the Idiosyncratic Volatility Anomaly in the Cross- Section of Stock Returns

Ang, Hodrick, Xing, and Zhang (2006, 2009) document a puzzling negative relation between idiosyncratic volatility and cross-section of stock returns. This paper examines whether this idiosyncratic volatility discount is related to earnings shocks, and finds that a substantial portion of the idiosyncratic volatility discount can be explained by earnings momentum and post-formation earnings shock...

The Cross-Section of Volatility and Expected Returns

We examine the pricing of aggregate volatility risk in the cross-section of stock returns. Consistent with theory, we find that stocks with high sensitivities to innovations in aggregate volatility have low average returns. Stocks with high idiosyncratic volatility relative to the Fama and French (1993, Journal of Financial Economics 25, 2349) model have abysmally low average returns. This phen...

Inflation Risk and the Cross Section of Stock Returns

I establish that inflation risk is priced in the cross section of stock returns: Stocks that have low returns during inflationary times command a risk premium. I estimate a market price of inflation risk that is comparable in magnitude to the price of risk for the aggregate market. Inflation is therefore a key determinant of risk in the cross section of stocks. The inflation premium cannot be e...

Capital, Contracts and the Cross Section of Stock Returns∗

We present a tractable, static, general equilibrium model with multiple sectors in which firms offer workers incentive contracts and simultaneously raise capital in stock markets. Workers optimally invest in the stock market and at the same time hedge labor income risk. Firms rationally take agents’ portfolio decisions into account. In equilibrium, the cost of capital of each sector is endogeno...