We investigate the role of the average risk across stocks in predicting subsequent mar- ket returns using measures of risk that capture the higher moments of the return distribution including variance, skewness and kurtosis, as well as measures of tail risk that combine these. We find that...

We investigate the predictability of the G10 currencies with respect to lagged currency returns from the perspective of a U.S. investor, using the maximally predictable portfolio (MPP) approach of Lo and MacKinlay (1997). Out-of-sample, the MPP yields a higher Sharpe ratio, higher cumulative...

The propensity of households to invest in stocks is lower than implied by Expected Utility Theory. One explanation suggested in the literature is that stocks entail ambiguity and investors are ambiguity averse. We test this hypothesis, measuring participation using equity fund flows and...

We investigate the impact that the publication of the Bank of England's Financial Stability Report (FSR) has on the stock returns and credit default swap spreads of UK financial institutions. Examining a sample of 73 UK-listed banks and other financial institutions, we find that publication of...

This paper proposes a simplified multivariate GARCH model that involves the estimation of only univariate GARCH models, both for the individual return series and for the sum and difference of each pair of series. The covariance between each pair of return series is then imputed from these...