Idiosyncratic Risk and the Cross-Section of Expected Stock Returns

Theories such as Merton (1987) predict a positive relation between idiosyncratic risk and expected return when investors do not diversify their portfolio. Ang, Hodrick, Xing, and Zhang (2006, Journal of Finance 61, 259-299) however find that monthly stock returns are negatively related to the one-month lagged idiosyncratic volatilities. I show that idiosyncratic volatilities are time-varying and thus their findings should not be used to imply the relation between idiosyncratic risk and expected return. Using the exponential GARCH models to estimate expected idiosyncratic volatilities, I find a significantly positive relation between the estimated conditional idiosyncratic volatilities and expected returns. Further evidence suggests that Ang et al.’s findings are largely explained by the return reversal of a subset of small stocks with high idiosyncratic volatilities

Are you my Mentor? Informal Mentoring Mutual Identification

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Affect as a Decision-Making System of the Present

article is based on the first author’s doctoral dissertation completed under the second author’s direction at Columbia University. The authors thank the other members of the dissertation committee—Eric Johnson, Leonard Lee, Tom Meyvis, and Elke Weber—for their very useful input at various stages of this project. They also thank Jiewen Hong, Seshan Ramaswami, and Anne-Laure Sellier for their helpful comments, and the various members of the Research o

A Dynamic Model for the Forward Curve

This paper develops and estimates a dynamic arbitrage-free model that models the current forward curve as the sum of (i) an unconditional component, (ii) a maturity-specific component and (iii) a date-specific component. The model combines features of the Preferred Habitat model, the Expectations Hypothesis and affine yield curve models. We show how to construct alternative parametric examples of the three components from a sum of exponential functions, verify that the resulting forward curves satisfy the Heath-Jarrow-Morton conditions, and derive the risk-neutral dynamics for the purpose of pricing interest rate derivatives. We select a model from alternative affine examples that are fitted to the Fama-Bliss Treasury data over an initial training period and use it to generate out-of-sample forecasts for forward rates and yields. For forecast horizons of 6-months or longer, the forecasts of this model significantly outperform forecasts from common benchmark models

Procurement Risk Management in Beef Supply Chains

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Acute Muscular Sarcocystosis: An International Investigation Among Ill Travelers Returning From Tioman Island, Malaysia, 2011-2012

A large outbreak of acute muscular sarcocystosis (AMS) among international tourists who visited Tioman Island, Malaysia, is described. Clinicians evaluating travelers returning ill from Malaysia with myalgia, with or without fever, should consider AMS in their differential diagnosi

Modeling Transaction Data of Trade Direction and Estimation of Probability of Informed Trading Modeling Transaction Data of Trade Direction and Estimation of Probability of Informed Trading Modeling Transaction Data of Trade Direction and Estimation of Pr

Abstract This paper implements the Asymmetric Autoregressive Conditional Duration (AACD) model o